As Europe’s shift to instant account-to-account payments accelerates, the pressure on financial institutions to implement robust fraud safeguards is mounting.
Movitz Payments CEO and founder Magnus Hedenberg, who recently spoke to Tieto, warns that delaying Verification of Payee (VoP) is no longer a viable strategy, and the consequences of inaction are both measurable and severe.
VoP sits at the heart of the European Payments Council’s (EPC) push to protect instant payments by confirming the identity of payers and payees before funds are transferred. The evidence in its favour is compelling. In markets where it has already been deployed, such as the Netherlands and the UK, VoP has been shown to reduce all-cause fraud by 81% and misdirected payments by 67%. Yet some European banks remain on the fence.
The concerns vary. In Norway, there are questions over whether VoP conflicts with national data privacy legislation. Others are reluctant due to the perceived cost of engaging a Routing and Verification Mechanism (RVM) provider.
Hedenberg, whose firm has partnered with Tieto Banktech to offer end-to-end RVM services, argues these concerns are being weighed against the wrong set of risks. Under forthcoming SEPA rules, liability for fraud losses will shift directly to banks that have not adopted VoP. Meanwhile, Authorised Push Payment (APP) fraud linked to instant payments is surging globally, with losses in the US and India alone forecast to exceed $5bn by the end of this year.
Corporate clients have also raised objections, particularly around the processing of large batch payment files when a single mismatch triggers a delay.
Hedenberg said, “As CEO and Founder of Movitz Payments, I speak with corporate clients frequently. During one recent conversation, a “C” suite corporate executive told me that, “We won’t have time to introduce something automated or connected, we would like to use a manual service. Today that’s offered by a service provider in the UK, we would like it to work the same but offered by a bank.”
He added, “Another client “C” suite executive recently told me that, “we have a manual process for when setting up a new supplier or changing details via our Operations team. We would of course want this to be digitalized but we’re afraid of the operational work from VoP if we can’t validate our master data upfront.”
Hedenberg challenges both positions. He contends that manual exception handling is neither cheaper nor more reliable than VoP, especially when exceptions still need to be resolved regardless of how they are identified. Catching a discrepancy in near real-time is far preferable to discovering fraud after settlement.
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