Verification of Payee, also known as Confirmation of Payee, is a part of the European Commission’s Instant Payment Regulation, which is expected to become legislative for cross-border instant payments for EU countries in 2025. While some countries already have an infrastructure for domestic use to develop further, many still lack a solution. In this article, Magnus Hedenberg, CEO at Movitz Payments, shares his insights from working with Confirmation of Payee and how stakeholders such as banks and PSPs best meet the challenge that lies ahead.
When the European Commission presented its new legislative proposal for instant payments, the Instant Payment Regulation, an important question was how to make payments safe and user-friendly. To solve this, the legislation requires banks and PSPs (payment service providers) to validate the payee before a payer makes the final sign-off. This process is now called Verification-, or Confirmation of Payee (CoP), and in the near future, it will be a requirement for every EU country, in and outside the eurozone.
The implementation of CoP for cross-border transactions poses an intricate challenge for banks across Europe as it will affect the underlying infrastructure at its core. But there are still ways to get ahead of it all. We met with Magnus Hedenberg, CEO at Movitz Payments, to gain his insights on working with CoP, implementing it in their service offering, and supporting banks on their journey forward. By partnering with SWIFT, Movitz Payments has developed a service called Account Verification, which will ensure that payments are sent to their intended destination. It pre-checks the receiving account’s numbers and names, giving the payer a clear indication of whether it is the correct receiver or not. This is essentially what Confirmation of Payee is all about.
– We are in the business of modernizing payments, and an essential part of that is making payments as smooth and safe as possible for the end user. From a CoP point of view, this means eliminating payment errors and delays by ensuring accurate account details in an early stage of the payment process. There is already proof of concept from the UK and the Netherlands that working with CoP has a positive effect, Magnus Hedenberg explains.
Analyzing Confirmation of Payee from a global perspective
When Magnus says that CoP has already been proven to work, he is absolutely right. Now, let’s delve deeper into what exactly that means. Today, Confirmation of Payee is mandatory for the major banks in the UK and will be mandatory for all banks and PSPs operating in the country later this year, with an instant payment option for domestic transactions, impacting approximately 400 organizations in the country. It has been proven to decrease certain types of APP (Authorised Push Payment) fraud and faulty or misdirected payments. In the Netherlands, fraudulent orders have been reduced by 80%, according to the PayTech Solution Provider SurePay.
– The UK and the Netherlands have successfully implemented Confirmation of Payee on a domestic scale, and protecting users from fraud is now more important than protecting the fraudster’s data. That being said, the global market is very fragmented, and readiness for CoP with regard to both infrastructure and local solutions varies from country to country, Magnus says.
Most of the Nordic region has a common scheme rulebook on how to approach Confirmation of Payee, provided by the Nordic Payment Council. Still, the domestic infrastructure of the member countries differs. The ones with their own currency, Sweden, Norway, and Denmark, already have basic domestic infrastructure in place. Finland, which uses the euro and thus follows a rulebook provided by the European Payment Council, still lacks local infrastructure. Without a domestic solution in place, it will be challenging to apply CoP to cross-border instant payments in time.
– Finland and the Baltic countries now have a sense of urgency and should act sooner rather than later. From my perspective, this derives from three main reasons: a lack of common ground between stakeholders, low data quality, and a belief that the deadline for implementation can be delayed, Magnus explains.
Confirmation of Payee is an opportunity for increased payment quality
Magnus points out that Confirmation of Payee is not something to handle with the bare minimum effort. Even if such an approach can save time and costs initially, it risks having long-term negative – and expensive – consequences.
– My honest analysis is that banks and PSPs that choose to be inactive on the matter or do the bare minimum will create a bad reputation for themselves. With substandard solutions, they risk attracting more fraudsters who can use their services to continue their criminal activities. Of course, this will also result in even more resources spent to fix the issue itself and salvage their reputation. We’ve seen this in the UK, where the fraudsters opened new mule accounts with banks not yet connected to the CoP service.
In the EU, all banks and PSPs must be able to receive instant payments in January 2025. For banks and PSPs within the eurozone, the deadline for implementing CoP for sending euro payments is expected to be October 2025. For those in non-eurozone member states, the deadline for receiving instant payments is 9 January 2027, and the deadline for sending instant payments is 9 July 2027.
Last but not least, banks and PSPs in non-eurozone member states must be able to receive and send instant payments during the first half of 2027. This also applies to non-bank PSPs such as electronic money institutions and payment institutions.
Even though it is a short window, there is still enough time to make conscious, long-term, smart decisions.
– First and foremost, banks and PSPs must acknowledge that expert help is often a necessity. Taking full responsibility for changing their own infrastructure and developing their own solutions is no longer a sustainable option, considering time and cost. There are already vendors offering complete solutions ready to be implemented in their infrastructure, Magnus says.
Magnus highlights two main tracks when elaborating on the upsides of Confirmation of Payee – Safety for the end user and increased trade between neighboring countries.
– As users, we all want to be sure that our payments go to the right person and account, especially when fraudsters use the same digital tools as us when stealing our money. Confirmation of Payee should also incentivize safe transactions between countries, thus increasing cross-border trade.
Concrete actions to succeed with the implementation
Banking sector stakeholders have generally been reluctant to share information externally and have kept their data for internal purposes only. But, according to Magnus, if bankers want to succeed with the Instant Payment Regulation and Confirmation of Payee, they must open up for collaboration and sharing of information and data and focus on a single future-proof payment channel.
– The new regulations are centered on how we manage and share data. First, internal data quality must improve for it to be useful, for instance, in terms of confirmations. Second, banks and PSPs must prioritize collaboration and interoperability. The market is gigantic, and at this stage, we should agree on a joint approach and work together instead of competing with each other, Magnus says.
But who will make all of this come true? When asking Magnus he is clear on which roles should be considered.
– Every bank needs a collaborative forum where different fields of expertise can be combined. You need compliance or legal resources, product owners, architects, people with technical knowledge, and those who can provide payment insights. I am speaking from my own past experiences, if I knew then what I know now, I would have started collaborating even earlier, Magnus finishes.
Summary and conclusion
Confirmation of Payee has already been implemented and proven to work domestically in several European countries. While some are still behind in the development, the fact that it will become legislative for banks and PSPs in the eurozone in 2025 remains.
Each country, bank, and PSP has unique conditions for implementing Confirmation of Payee. However, the common denominator is that they will need each other to succeed. Sharing knowledge, experience, and data is not only a cornerstone of succeeding but also the essence of Confirmation of Payee.
Support and solutions are available to the market; it is time we act together.
