Navigating Verification of Payee: UK, EU and globally

Verification of Payee (VoP) is an additional mandatory layer of payments protection to avoid payments in error and to prevent fraud such as an Authorised Push Payment (APP).

With the increased adoption of instant payments (FPS, SEPA Instant), users have potentially become more susceptible to fraud as there is less time to intervene and stop the payment, and it may be difficult to reverse once processed. Fraudulent payments made in real time make it more difficult for financial institutions to track and intercept transactions when they involve multiple jurisdictions.

This blog highlights adoption, progress, scalability, and interoperability challenges of various Verification of Payee offerings.

Confirmation of Payee (CoP) in the UK

In the UK, CoP is a payee account name checking service provided by Payment Services Providers (PSPs) and mandated by the Payment Systems Regulator (PSR). CoP was introduced in 2020, and Pay.UK has confirmed a 17% reduction in APP fraud in 2023. As of October 2024, the service had processed over 2.5 billion checks since it launched.

Recent changes to the initial CoP, including removing the dependency on Open Banking, also known as ‘CoP Expansion’, and the introduction of the ‘aggregator model’ have increased the number of participants. As of today, over 400 PSPs have signed up for CoP.

Becoming a PSP Aggregator also helps banks and Financial Institutions (FIs) to monitise their CoP check implementation by providing the service to other FIs.

The UK is slightly ahead of the curve and there are ongoing updates of CoP features to expand the supported use cases such as PNV (Payer Name Verification) checks for direct debit set-ups.

European offering and next steps

European banks are due to implement Verification of Payee under the SEPA Instant Payments Regulation (IPR). This applies to the SEPA CT and SEPA Inst schemes. The deadline is October 2025 for all PSPs that operate in a member state of the eurozone. Those outside of the eurozone, such as the UK, need to support VoP by July 2027.

The European Payments Council (EPC) has officially issued the first version of the Verification of Payee Scheme Rulebook EPC218-23. This is designed to support PSPs across the Single Euro Payments Area (SEPA) in meeting the new regulatory requirements outlined in the EU Instant Payments Regulation (IPR), amending the SEPA Regulation.

Some European countries such as Belgium, France, Italy and the Netherlands have already implemented Verification of Payee at a domestic level, with some known challenges around interoperability. The EPC plans to communicate some additional information about how to achieve reachability and interoperability for VoP at an EEA level, including mandatory registration in the EPC Directory Service (EDS).

Consequently, some companies have started offering services conform with the VoP scheme. An organisation in Germany is working on a tool that helps identify and prevent fraudulent activity in payment services called FPAD (Fraud Pattern Anomaly Detection). FPAD validates account details and assesses the risk of transactions in real time, and Verification of Payee is one of the anomaly detections covered by its functionality. Similarly, a couple of organisations in Spain and the Netherlands offer services for Verification of Payee to address some of the more challenging use cases.

Global reach and challenges

Progress has been made across various countries globally with regard to payee details checks. One example is Australia: New Confirmation of Payee service hits important milestone – Australian Banking Association.

Swift launched their flavour of payee name verification checks in November 2021 as Beneficiary Account Validation (BAV) under the ‘Pre-Validation APIs suite’ which also includes payment validation and fee prediction to support friction-free cross-border payments using a real-time API-based mechanism.

A new offering from Swift, the ‘Central Beneficiary Account Validation (CBAV)’, uses Swift’s past transaction data to check if the beneficiary account is valid and capable of receiving funds. This is different from BAV, where the check is peer to peer. CBAV may have much wider global reach to reduce latency and friction in cross-border payments but an additional fee may be applied for accessing and querying the central database maintained by Swift.

There is a global need to avoid misdirected domestic and cross-border payments, while maintaining the speed of payments processing. Key challenges when rolling out these services include:

Use cases support – A requesting party or a PSP requester (a bank or FI) may agree to exchange several requests as single items or as a bulk request but current offerings (as per their rulebooks) from services like CoP, VoP and BAV only support single payee details in one API request. This limits the number of supported use cases. Some firms facilitate bulk request checks via their ‘batch check API and portal’. There are other similar offerings and it’s down to the PSPs which ones they chose. Essentially, they’ll have to ensure the SLA is maintained for better customer experience.

Compliance and regulations – Sending payments data across jurisdictions may pose challenges and getting the full picture of all the regulatory requirements involved can be complex and time-consuming. For example, VoP has been implemented by many countries in Europe, but for VoP to work cohesively across implementations remains a challenge.

Operational efficiency – Name verification checks may slow down the payments processing at a global level. Also, there can be a reluctance with the acceptance of a new system in payments operations and that shouldn’t impact customer service and payments processing time.

Data accuracy and security – Inaccurate or incomplete beneficiary data in global checks can lead to misdirected and delayed payments. Also, ensuring the security of data exchanged between banks and financial institutions is paramount to prevent fraud and data breaches.

As of now over 70 banks have signed up for BAV. To be a fully effective service, a widespread adoption by the banks and financial institutions is necessary. However, convincing all stakeholders can be a slow process due the scalability and reach of this kind of service.

Rising to the challenges of VoP

Payee details check services with distinct models as a theme are only going to grow globally. Also, due to the widespread acceptance of Open Banking, these services are expected to support several types of payments schemes and will remain key in the fight against fraud. The increasing use of beneficiary checks, especially in cross-border payments, may add new use cases and new challenge for regulators. Interoperability and data compliance pose another key challenge in this area due to the lack of a standard messaging format globally.

PSPs and banks need to start implementing a common service to expose the Verification of Payee functionality to their customers via channels irrespective of the type of payment – domestic or global. This service needs to be highly available, reliable and scalable.

Whether you are an existing participant or planning to use an aggregator model, get in touch with us for more information on CoP, VoP and other global beneficiary verification initiatives. Icon’s business and technology architecture consultants can prepare and help you implement these in line with your existing payments transformation journeys.

Also, the Icon Payments Framework (IPF) has some defined patterns to use ‘Verification of Payee’ in a way that it gives PSPs the flexibility to offload most of their work needed to act as a requester and a responder for payee details verification. Most of this control is within the defined flows. We have already helped a number of our clients implement the CoP service in the UK and VoP in the EU.