The introduction of Verification of Payee (VoP) checks for SEPA (Single Euro Payments Area) Credit Transfers from October 2025 brings several positives, but the aggressive implementation timeline is concerning for industry participants. A phased approach, which allows more time for testing, would ensure the system functions effectively before scaling up.
VoP in context
VoP is an account name-checking service designed to reduce fraud and misdirected payments. It ensures that payments are directed accurately and securely by verifying that the details provided by a payer match the account holder’s details at the recipient bank before funds are transferred.
Several European markets, including Belgium, France, Italy, the Netherlands and the UK, have successfully rolled out payee verification services for domestic payments. Now, the EU’s Instant Payments Regulation (IPR) brings VoP checks into the cross-border realm.
The IPR mandates that Payments Services Providers (PSPs) that offer standard SEPA Credit Transfers must also offer their customers the option of sending and receiving payments via SEPA Instant Credit.
To mitigate fraud risks and boost consumer confidence in instant payments, the IPR also mandates that PSPs conduct VoP checks. The specifications for VoP are being drawn up by the European Payments Council, which is scheduled to publish the first scheme rulebook in October 2024. PSPs will have until October 2025 to implement the service.
VoP in practice
VoP has implications for PSPs on both sides of the transaction, with the verification process working as follows:
2. The payer’s PSP (the Requesting PSP) sends a request to the recipient’s PSP to verify the details provided.
3. The recipient’s PSP (the Responding PSP) instantly verifies if the details provided match those of the registered customer.
4. The Responding PSP provides the Requesting PSP with a response: match, no match, close match with the name of the payee or match/verification check not possible.
This entire process should take place within three seconds, and the service needs to be available around the clock. Requesting PSPs will need to collect the required information while responding PSPs must ensure they can accept the incoming requests and build the matching technology to verify the data in line with the EPC’s Rulebook.
Benefits of VoP
Unquestionably, there are several benefits to VoP checks. First and foremost, VoP significantly enhances security by verifying critical information before payments are processed. This not only reduces the risk of fraud but also minimises instances of misdirected payments, which are costly and inconvenient for all parties.
Additionally, it reduces friction that currently exists in payments. SWIFT, for example, notes that 72% of SWIFT payments requiring manual intervention do so because of avoidable issues such as incorrect account numbers and formatting errors. VoP checks would drive this number down.
Lastly, VoP boosts customer confidence in digital banking. As individuals and businesses become more reliant on online and mobile banking, transaction security is paramount. By integrating VoP into the payment process, PSPs signal their commitment to protecting customer funds and information.
Challenges of rapid implementation
The benefits notwithstanding, the aggressive 12-month implementation timeline raises concerns. The UK’s Confirmation of Payee service took seven years to implement, including preparations ahead of launch in 2020, which was followed by a phased rollout across different categories of PSPs. It, therefore, seems a tall order for the EU, with its diverse and fragmented banking systems, to achieve implementation in just one year.
Firstly, there are several technical challenges. Integrating VoP into existing banking systems is a complex task that requires coordination across various platforms and networks. Requesting and responding PSPs will need to communicate seamlessly, and there are several ways in which the data can be transmitted between the two parties.
Data standardisation is another issue. Consistency is vital for VoP to work efficiently, but PSPs across the EU operate on different data structures and systems, making standardisation a daunting task. The cross-border nature of VoP introduces further complications, as different countries may have varying regulations and requirements.
Secondly, there are user experience considerations. Implementing VoP without disrupting the user experience is no mean feat. Customers expect quick and seamless transactions, and any added steps or delays can lead to frustration and resistance. Businesses will also have to update their processes; this will likely have a disproportionate impact on small businesses, which have less bandwidth to process these changes.
Finally, there are concerns over partial adoption. If VoP is not fully implemented, the resulting gaps create opportunities for fraudsters to exploit inconsistencies and undermine the overall effectiveness of the initiative.
Given these challenges, a more realistic timeline is essential. A phased approach to implementation, which starts with large PSPs, could mitigate the risks associated with a rushed rollout. This would allow for thorough testing and adjustments based on real-world feedback, ensuring that the system functions effectively before extended adoption.
A revised approach
As digital banking and instant payments become the norm, VoP checks will become an integral feature of the payments landscape. They help to reduce fraud, error and friction in the payment process and foster customer confidence in digital banking.
However, as national rollouts have demonstrated, implementing these services is a complex and lengthy process involving several parties. Rolling out this service across multiple countries only multiplies this complexity, making the October 2025 deadline unrealistic.
A revised timeline, which phases the implementation, increases the likelihood of successful delivery, providing benefits for all.
