The European Union is enhancing payment security by implementing Verification of Payee (VoP), a system designed to help prevent misdirected payments and authorised push payment (APP) fraud. Here, I’ll explore the initiative's development, implementation, and expected benefits. 

The Instant Payment Regulation entered into force in April 2024. This regulation is the culmination of a multi-year initiative to modernise the payment landscape across the European Union and accelerate the rollout of instant payments across its member states. While this is the right step for consumers and businesses, there are risks to instant payments. 

First, the scheme is designed to be irrecoverable, and payments are not guaranteed to be recalled if sent in error. Second, the speed of the payments increases the risk profile of these transaction types, with instant payments being the preferred method of fraudulent transactions, primarily authorised push payments. 

That’s where Verification of Payee (VoP) comes in.

IBAN / name checking is not a new concept in Europe, and there are multiple domestic offerings across SEPA member states. However, these offerings typically cover domestic transactions and operate with different standards and rulesets. Introducing VoP closes this gap by enabling interoperability by providing a standard Pan-European specification. 

The European Payments Council (EPC) has been instrumental in developing the VoP specifications, working closely with financial institutions and Payment Service Providers (PSPs). This collaborative effort has focused on ensuring the system is robust and seamless to implement across the EU's diverse banking landscape.

All European PSPs that provide SEPA payments must implement VoP. However, this will be undertaken in a phased approach, dependent on whether the member state uses the euro as its currency.  

The first phase requires PSPs registered in a Member State of the EU that uses the euro domestically to be VoP reachable by 9 October 2025. 

The second phase requires PSPs registered in a Member State of the EU that doesn’t use the euro domestically to be VoP reachable by 9 July 2027. 

Implementing this service will require technical and non-technical efforts from both sides, the payer’s (Requesting PSP) and the payee’s (Responding PSP) PSPs. Many are updating their systems and procedures to accommodate the new requirements in line with the EPC’s VOP scheme Rulebook.  

The VoP system will operate as part of the standard payment journey, adding a mandatory VoP check before a payment can be authorised and initiated. This check helps ensure that payments reach their intended recipients by flagging discrepancies between the entered recipient details and the actual account holder information. 

The VoP service must be available 24/7, with a maximum execution time of five seconds (preferably one second or less), starting at the point at which the Requesting PSP addresses its VoP request to the Responding PSP.  

In the VoP scheme, there are five key actors: 

• The Requestor: The natural or legal person intending to initiate the payment.
• The Requesting PSP: The Participant with whom or through whom the Requester intends to make its payment.
• The Responding PSP: The Participant that receives the VOP Request from the Requesting PSP, instantly processes it and provides a response.
• Routing Verification Mechanisms (RVMs): RVMs are an optional solution that PSPs can use on both sides of the flow. RVMs provide a single entry point for the PSPs to connect to the scheme and route VoP requests and related VoP responses. They can also undertake VoP checks and matching on a PSP’s behalf.
• EPC Directory Service (EDS): The EDS is a central directory that stores and maintains all required operational data about participants to facilitate their reachability. 

Since implementing Confirmation of Payee (CoP), the UK has seen several benefits, and VoP should deliver similar outcomes in the EU. 

The European payments ecosystem aims to increase the security and reliability of payment systems, particularly as SEPA Instant is mandated across the eurozone, by providing a standardised payment verification process. This, in turn, should enhance trust in digital, real-time payments while also helping to combat fraud. 

For consumers across the EU, it will:  

• Reduce the risk of sending payments to incorrect accounts
• Provide greater confidence in making online payments
• Deliver visibility of potential mismatches before a transaction is completed
• Enhance protection against APP fraud 

For businesses across the EU, it will:  

• Reduce the risk of payment errors
• Lower operational costs associated with payment investigations
• Improve customer confidence in payments
• Reduce liability for misdirected payments 

For financial institutions across the EU, it will:  

• Reduce the costs associated with investigating and resolving misdirected payments
• Support efforts around reducing fraud-related losses
• Enhance customer trust and satisfaction in real-time payments  

ClearBank offers two services to enable our clients to meet these regulatory requirements: 

• The Requesting Service: Where ClearBank instantly raises the VoP Request provided by its clients to the Payee’s PSP. Once the Payee’s PSP sends the response, ClearBank notifies its client of the prescribed response.
• The Responding Service:  Where ClearBank instantly verifies the details provided in the VoP request to see if they match the account holder’s details. Depending on the result, ClearBank will send one of the four prescribed responses — match back to the Payer’s PSP, no match, close match with the name of the payee or match/verification check not possible.