Enhanced Safety Measures Implemented for Bank Clients
**New EU Regulation to Boost Payment Security in Eurozone**
A new European Union (EU) regulation, **Regulation (EU) 2024/886**, set to take effect from October 9, 2025, will significantly enhance the safety of euro payments within the Single Euro Payments Area (SEPA). The regulation mandates Verification of Payee (VoP) for all payment service providers (PSPs) across the Eurozone, including banks, in a bid to reduce payment fraud and errors.
The Verification of Payee Service (VoP) requires PSPs to verify that the payee name entered by the payer matches the actual account holder's name linked to the International Bank Account Number (IBAN). The verification result will be provided to the payer before the payment is finalized, with responses such as "match," "close match," or "no match."
The objective of the VoP mechanism is to enhance trust and security in euro payments by mitigating fraud types such as authorized push payment fraud and impersonation, as well as preventing payments sent to incorrect IBANs. All PSPs in the Eurozone, including banks, payment institutions, and e-money institutions, are required to comply. PSPs outside the euro area have until July 9, 2027, to meet the Instant Payment and VoP requirements.
Banks and PSPs must establish the necessary infrastructure to perform instant payment processing and beneficiary verification. This infrastructure will support instant payments processed through platforms like TARGET Instant Payment Settlement (TIPS). Member states have set strict penalties for non-compliance, with fines up to 10% of annual turnover or €5 million, underscoring the regulation's importance in fostering consumer protection and payment security across the EU.
Ingo Beyritz, head of payments at the Association of German Banks (BdB), states that until now, payers had to trust the data they received via invoice or email. However, with the new regulation, banks in the Eurozone are now required to check the name of the payee and the entered IBAN against the target account data before approving transfers.
Payee verification will be carried out in seconds, with the payer informed of the result before the transaction is completed. The service should ideally be free of charge for customers, according to the European Union's guidelines. Private banks in Germany are technically prepared for the implementation of payee verification, according to the BdB.
It's important to note that the EU regulations for payee verification do not apply to the United Kingdom and Switzerland. However, non-EU countries such as Iceland, Liechtenstein, and Norway have the option to adopt the EU requirements for payee verification.
In conclusion, the new EU regulation aims to significantly boost payment safety in the Eurozone by requiring banks and other PSPs to verify payee information before approving credit transfers, thus preventing fraud and mistakes in cross-border and domestic euro transactions.
The new EU regulation, Regulation (EU) 2024/886, necessitates banking-and-insurance institutions, as well as other payment service providers (PSPs), to incorporate the Verification of Payee (VoP) service in their operations, Businesses must comply with this obligation from October 9, 2025, to enhance economic and social policy within the Single Euro Payments Area (SEPA). This service will verify the payee's name against the account holder's name linked to the International Bank Account Number (IBAN), providing a response before the payment is finalized, thereby optimizing finance and reducing errors and fraud in euro transactions.
