Today marks the deadline for banks to be ready to both send and receive SEPA Instant Payments under the Instant Payment Regulation from the EU, with the go-live of the bloc’s Verification of Payee (VoP) infrastructure. While some experts have welcomed this milestone, others note the high percentage of banks still not prepared for this change.
Victor Mithouard, Senior Director, Payments, at Mambu, hailed the move as evidence of Europe’s ability to move rapidly, “delivering this infrastructure in just one year, compared with five years in the UK and no comparable infrastructure in the US.” The EU estimates that this move could save €2.4 billion in fraud each year.
While the move is certainly welcome, Mr. Mithouard’s comments may be slightly unfair in the case of the UK, which has had a Confirmation of Payee system running since 2020 – as has the Netherlands at a domestic level. In that context, the EU may be said to be somewhat slow to act. In the UK and the Netherlands, the introduction of VoP has indeed led to an 81% reduction in all-cause fraud and a 67% reduction in misdirected payments. While that’s good news, the EU’s estimate of a €2.4 billion reduction in fraud is identical to the €2.4 billion lost to APP fraud across the bloc last year. VoP will dramatically reduce fraud, however it’s not – by itself – a panacea.
Some experts have also expressed concerns about banks and PSPs having underestimated the operational challenges associated with the shift to instant payments, with up to 30% of banks estimated to still be not fully prepared for the switch to VoP. Grant Harper, Global Lead for Financial Services at IT resilience specialists ITRS argues that robust operational resilience is even more critical under the new instant payments mandate. According to Mr. Harper,”the implications of downtime for any bank are serious, but the consequences are even more profound under SEPA Instant. Even a brief outage could prevent a bank from sending or receiving payments, risking compliance breaches, customer dissatisfaction, and long-term reputational damage.”
A number of providers are stepping up with solutions to make it easier for banks to introduce Verification of Payee, with the EU having accredited providers of Routing and Verification Management (RVM) solutions such as Tietoevry Banking to manage the processes behind VoP on behalf of banks. In this regard, it’s also worth noting that ASEAN countries have developed a functioning cross-border real-time payments network via a series of one-to-one integrations between domestic payment systems. While this approach differs vastly from the EU’s deadline and regulation-driven variety, it’s one which is bearing fruit, with cross-border instant payment volumes in Asia projected to grow by 7.1% per year to US$320 trillion by 2030, according to Grand View Research. By contrast, SEPA Inst volumes across the EU were around €30 billion last year.
Share this
