A crisis of trust: European and global verification brings safety to payments
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This content has been created by the Finextra editorial team with inputs from subject matter experts at the funding sponsor.
Verification of Payee (VoP) has rapidly become an essential aspect of banking and payments, ensuring security and safety in payments transactions.
By October 2025, all European Payments Service Providers (PSPs) using SEPA instant and non-instant transfers will need to verify payee account details before processing payments. As the EPC's deadline is fast approaching, PSPs must urgently implement the VoP scheme or risk falling behind regulatory compliance and industry standards.
The European Instant Payments Regulation and EPC VoP scheme requires all credit transfers across the Eurozone to be accompanied by a match of the account beneficiary's name. To comply, almost 5,000 European financial institutions will need to introduce a Routing and Verification mechanism (RVM) to make VoP requests and responses.
Shedding light on the subject, Finextra spoke to Michael Moon, head of strategic market development at iPiD. This article outlines the main challenges facing VoP adoption, the solutions offered by third-party providers, and what VoP adoption will accomplish for the faster payments industry, both nationwide and on a global scale.
Moon states: 'In the instant payments era, if you don't have the protections against the fraud and mistaken payments, your business is going to become a lot harder to operate.'
Why is the VoP scheme essential?
As instant payments increase, so does fraud and so must global verification confirmation services, as Moon points out. The impersonation and manipulation tactics that are being used by fraudsters to authorise payments have created what Moon labels a 'crisis of trust.'
Verification of the payee is of critical significance to prevent fraud, and so the VoP mandate is arriving at a critical time to accompany instant payments growth as it continues to skyrocket.
According to Moon, 'the world has been introduced to faster payments for many years now. Instant payments are incredibly pervasive across many countries in the world. Certainly in Europe, there have been efforts to increase instant payments.
'More recently, the European Commission introduced a regulatory package known as the IPR, or Instant Payments Regulation, and that came from dissatisfaction in Europe with the level of adoption of instant payments in the market. What the regulation made clear is that, if you are a payment service provider in the business of making credit transfers, you need to offer the ability to both send and receive payments on an instant basis,' states Moon.
Recognising the potential risks that accompany speed, the regulator, with the benefit of international evidence such as the UK's Faster Payments system, acknowledged that instant payments inevitably leads to greater fraud risks. As such, the widespread adoption of instant payments could not be pushed forward in isolation, without appropriate safeguards. Hence, the VoP mandate was born.
VoP, while not a silver bullet, has had a direct result on clamping down on fraudsters. In 2023, the UK's equivalent initiative Confirmation of Payee (CoP) led to a 17% decrease of APP fraud in 2023. According to data from Fortra in 2025, 77% of businesses uses CoP to prevent fraud and 96% agree that CoP is effective in reducing fraudulent transactions.
Challenges to satisfy the approaching deadline
A major challenge that financial institutions will need to overcome is managing their time wisely. Meeting the 9 October deadline requires phases of testing to be completed by July to ensure full readiness by the autumn, which sets PSPs on a tight timeline for preparation.
Furthermore, global cross-border fragmentation adds another layer of complexity to meeting the deadline. Organisations that operate in multiple markets have more regulatory requirements to navigate. Moon added that large banks and payments firms that have a significant portfolio of corporate clients will also have to manage the complications of providing verification services for them as compared to individual customers.
Third party providers can offer verification and validation schemes that understand and can streamline the transaction process. Moon points out that institutions looking to standardise their services across multiple markets and customer bases can gain support from third party providers that are best placed to serve their validation needs:
'These third party suppliers can help with the specific processes of making VoP requests and responding to those requests, as well as integrating with and orchestrating transaction activity with various services that need to be consumed to perform this. For example, there is a centralised electronic addressing service, the EPC Directory Service, which is a digital address book that identifies the recipient of these requests. Third parties, the RVMs, are the traffic police; sending, receiving, and responding on behalf of the payment service providers.'
Moon mentions how these third parties can offer a Know Your Payee (KYP) scheme aimed at standardising responses and solving dissonance in global transactions. Using iPiD as an example, Moon highlights how global KYP providers do the work of connecting services and creating a standardised response to the sender of any validation or verification request:
'Financial organisations get the benefit of global coverage and reach to different verification services and actually standardising that back into their environment, so they don't need to deal with the different levels of capturing and presenting data.'
Moon further explains that there are two forms of verification services that can be provided to PSPs:
A lite provider that directs the traffic, managing requests and responses. A full provider which offers more in-depth features that manage the level and scale of verification activity throughout Europe, such as having records of history and transaction activity to ensure a request was made and provide evidence of that request and transaction if needed.
The liability scheme that is soon to be introduced will hold PSPs accountable for any loss due to fraud or scams, which is why it is key to have evidence of transactions and transparency through the VoP scheme. Outside of scam and fraud, major inefficiencies such as mistaken payments and amending errors in the payments process can be resolved through VoP protocols.
Moon emphasises that improving defenses against scams both at a local level and a global level are essential, as verification is being introduced in various forms in different nations.
Moon concludes: 'As you move money faster, the risks of losing money to fraud and scams, particularly with the commensurate level of digitalisation in payment services, fraud losses and risks increase. We expect that all payments, whether they are local, in a single country like the UK or within the European marketplace, or payments that are conducted cross border and globally, we see all those payments having an upfront form of validation or verification. We think that is a necessary way to operate in the future.'
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