Panel: Beyond Speed – How Verification of Payee Will Redefine European Payments
Liisa Kanniainen (Nordea), Fredrik Tallqvist (EBA Clearing) & Renata Patiejunaite (iPiD)
Instant payment acceleration increases fraud risks, prompting European regulations mandating payee verification—matching name and IBAN—to curb fraudulent transactions, especially in SEPA credit transfers. Verification complexity involves bulk file validation, virtual IBANs, and diverse cultural naming conventions, impacting user experience and liability, with payers needing accurate input to avoid non-matches. Although verification reduces fraud, only about half of fraud cases are detected, necessitating additional fraud-fighting mechanisms leveraging network-wide transaction data. A strategic, interoperable, global approach integrating commercial services and decentralized registers aims to enhance trust across payments systems beyond Europe.
"Verification of payee is not a silver bullet for fraud—it solves part of the problem, but banks must adopt additional layers of fraud fighting mechanisms to keep payments reliable and maintain trust in the ecosystem."
Summary
- Instant payments are growing, but fraud is increasing faster, especially in instant payments with a 65% rise in 2024. - Verification of Payee (VOP) aims to confirm the payee's name matches the IBAN to reduce fraud and errors. - VOP implementation adds complexity and risks disrupting user experience; about 10% of payments face no-match issues due to incorrect names. - VOP is not foolproof; it catches about 50% of fraud cases. Additional fraud detection and data analysis are needed to combat evolving threats. - Long-term strategy involves expanding verification globally, enhancing data quality, and combining multiple fraud defenses to maintain trust in payments.
Article
Beyond speed: How Verification of Payee is redefining European payments
In a significant panel discussion at this year's Nordic Fintech Summit, payment industry experts addressed how Europe's new Verification of Payee (VOP) requirements are transforming the security landscape of instant payments while creating fresh challenges for users and providers alike.
The panel, featuring Liisa Kanniainen from Nordea, Fredrik Tallqvist from EBA Clearing, and Renata Patiejunaite from iPiD, explored how this regulatory shift will impact user experience and fraud prevention across the European payment ecosystem.
Fraud acceleration demands stronger verification
As instant payments become more widespread, fraudsters are keeping pace. "When payments are becoming faster, also the fraud is becoming faster," noted the panel moderator, highlighting the urgent need for additional security measures.
Tallqvist presented alarming statistics: "In 2024, we saw roughly a 35% increase for classic credit transfers and fraud increase. And for instant payment, that same figure was some 65% higher compared to 2023."
This growing threat has prompted European regulators to mandate Verification of Payee—a process requiring payment service providers to confirm that the account name and IBAN (International Bank Account Number) match before processing transactions.
Beyond compliance to user experience challenges
The panel acknowledged that implementing VOP comes with significant challenges that could potentially disrupt payment flows and user experience. Patiejunaite explained that while the concept seems straightforward on the surface, "the complexity down there, there's a lot of questions to solve practically and deliver the solutions."
These complexities include handling bulk payment files, managing virtual IBANs, and accommodating Europe's diverse cultural naming conventions, which create matching difficulties.
Tallqvist highlighted another critical dimension: "Who is responsible actually and liable for verification of payee?" He noted that this regulation represents "a major push for the payment initiator" who will now bear liability for ensuring payee verification.
No silver bullet for fraud prevention
Despite its importance, the panel was clear that VOP alone will not eliminate payment fraud. Tallqvist revealed that "only 50% roughly of fraud cases can be identified by verification of payee, which means that half of all fraudulent payments already pass VOP. So it's not a silver bullet solution."
This reality underscores the need for a multi-layered approach to fraud prevention. As Tallqvist explained, "What the banks need to do: they need to adopt additional fraud-fighting mechanisms."
He described how clearinghouses like EBA Clearing, which process the majority of euro transactions, can provide network-level insights by analyzing account usage patterns across institutions.
Global perspective and future outlook
The discussion expanded beyond European borders, with Patiejunaite emphasizing that verification needs should be addressed globally. "Today we are very much focused on implementing VOP in Europe. But the next question will be from customers: 'Why only Euro payments? I want to verify all my payments, all the currencies, wherever the money is going.'"
She noted that forward-thinking financial institutions in Asia and the Middle East are already implementing verification solutions voluntarily—not just for compliance but to enhance customer trust.
Strategic implications for European payments
As the October 9th implementation deadline approaches for many institutions, the panelists predicted some level of disruption is inevitable among Europe's 5,500 payment service providers.
However, they agreed that verification of payee represents an important evolutionary step in European payments, combining with other trust elements and data enrichment to create a more secure payment ecosystem.
"It's not a silver bullet—it's one element in the fight against fraud," the moderator concluded. "It's part of the bigger picture. This is one action which the customers and the banks and the whole industry need to cope with."
As instant payments continue to grow across Europe, the success of Verification of Payee will likely depend on balancing regulatory compliance with seamless user experience—all while adapting to increasingly sophisticated fraud threats.
Part of Nordic Fintech Summit