Verification of Payee (VoP): is it enough to fight fraud?

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The Verification of Payee is a major part of the Instant Payment Regulation. Its goal: fight fraud in the EU by checking the bank account number matches the recipient’s account’s name. While it is a first step towards reducing fraud, it isn’t enough to fully protect your business. Read on to learn what VoP is exactly and what type of fraud it protects your business from.

Trustpair is an anti-fraud software that automates account verification for businesses. Our algorithm fills the gaps of VoP so your payment chain is 100% protected. Contact an expert to learn more!

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What is Verification of Payee?

Verification of Payee (or VoP) is a European scheme to protect payment system users against fraud. It is part of the Instant Payment Regulation (IPR), released in parallel to the new PSD3.

The European Union’s goals are clear: to reduce fraud while developing new payment methods and open banking throughout the SEPA zone. It is a similar measure to the UK’s Confirmation of Payee (CoP).

While private pre-validation services (like SWIFT) already exist within Europe, this measure will make it general and mandatory for financial establishments.

Specifically, the VoP scheme is here to protect users against Authorized Push Payment Fraud (also called APP fraud).

In this scheme, a criminal impersonates someone the victim-to-be trusts (a bank clerk, a mobile phone company employee, etc.) and asks them to accept a push notification under a false motive. By doing so, the victim sends funds without realizing that the recipient isn’t who they said they were.

Instant payment systems and (most) wire transfers are instantaneous and irreversible so by the time the victim recognizes the fraud, it is usually too late.

With the rise of instant payment — and instant payment fraud — VoP has become a necessary protection against APP.

With VOP, service users will now be asked to provide the name of their recipient when sending a transaction. Their Payment Service Provider (bank or financial institution) will check this name to see if it matches the records of the receiving banking establishment.

This ensures the identity of the account holder is clear, reducing the risk of impersonation.

What is the verification of payee process?

The Verification Payee process is here to confirm the identity of the transfer’s recipient — the payee. Just like the Confirmation Payee regulation already implemented in the UK, VoP takes place before the money is sent.

The VoP involves several parties:

  • Payer,
  • Payer’s Payment Service Provider (PSP),
  • Payee’s PSP, Payee.

Here is the VoP step-by-step process:

  1. The payer enters the payee’s account details (sort code and IBAN) and name.
  2. The payer’s PSP sends a request to the payee’s PSP to check the information matches.
  3. The Payee’s PSP checks their record.
  4. The payer’s PSP receives a response they communicate to their payer.
  5. The payer decides to proceed, correct, or cancel the transaction.

The whole process is quasi-instantaneous, taking between 1 and 3 seconds (the mandatory response time dictated by the VoP scheme). Because of this, VoP doesn’t go against instant payment methods.

There are 4 answers possible from the payee’s PSP to the payee:

  1. Match: the name given by the payer matches the payee’s.
  2. Close Match: the payee’s name is close to the one given (there is likely a typo in the name entered).
  3. No Match: the name given doesn’t match the one on record.
  4. Verification is impossible: checks haven’t been made.

This process applies to the name of the payment counterparty (the payee), and takes place for businesses and natural persons.

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What is the VoP calendar?

Verification of Payee timeline is clear: according to the Instant Payment Regulation, payment service providers PSPs will have to offer VoP to all their customers by early October 2025.

The European Union voted the IPR in March 2024, giving financial institutions some time to develop and implement their VoP system.

According to the European Payments Council, here’s the VOP scheme evolution calendar:

  • March 2024: the EU accepted VoP.
  • February 2024: three-month consultation on a draft VOP scheme rulebook.
  • Mid-October 2024: publication of the first VOP rulebook.
  • October 5th, 2025: VoP enters into force.

This gives Payment Services Providers about a year to integrate Verification of Payee into their processes. They must offer it on all channels on which their customers can initiate payments: online and mobile banking, but also over the phone or in person.

The Instant Payments Regulation text published in the Official Journal of the EU states that VoP service is to be offered to PSP users at no additional charge.

VoP addresses both:

  • SEPA instant and non-instant credit transfers.
  • Individuals and businesses.

For businesses however, VoP isn’t nearly enough to protect themselves against financial fraud.

Is Verification of Payee enough to stop fraud?

While VoP protects against APP fraud, it isn’t enough to completely stop fraud. VoP only checks the name on the account — it doesn’t check if the bank account exists, or if the recipient is a real company.

At Trustpair, we’re seeing an increase in vendor fraud which VoP and CoP are no match for. In this scheme, criminals impersonate suppliers (real or fake ones) to get companies to pay them.

This can look like:

  • Hacking into your real supplier’s inbox and sending you an email requesting to change their bank account details for theirs. For example, they’ll state the company has changed their name, or they’ll have opened another account in the company’s name.
  • Creating a company with a matching bank account, and sending invoices to your company to get paid for services or goods never delivered. This variation is called invoice fraud and often involves employees who leverage their knowledge of your processes. Companies like Facebook and Google fell victim to this scheme, costing them more than $100 million.

The only real solution against fraud? Using fraud prevention software like Trustpair. We work as a SaaS and an add-on to your main ERPs (like SAP or other procurement platforms) to instantly check your vendors’ bank account details.

We do that automatically, which means, unlike VoP, you don’t need to manually review each transaction. Trustpair is more efficient and carries out more in-depth checks.

This is done in real-time, before every transaction you send out. We work with large international companies that have cross-border suppliers —making it hard and time-consuming for them to find accurate financial data.

But we have access to otherwise hard-to-access databases to carry out international account validation of your suppliers in the EU, US, Asia, and across the World.

Trustpair fills in the security gaps in your payment chain far more than VoP. With fraud schemes becoming more and more elaborate, using anti-fraud software is the only serious protection against fraud. We’ve worked with 300+ companies worldwide, with zero accounts of third-party fraud.

Key Takeaways:

VoP is a European scheme that checks funds transfers go to their intended recipients. PSPs check the name given by the payee matches the one on the account. While this reduces APP fraud, it isn’t enough to protect businesses. Using Trustpair protects your company more thoroughly and against all types of third-party fraud.

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FAQ
Frequently asked questions
Browse through our different sections and find the answer to your question.

VoP liability relates to who is responsible in case of fraud. If PSPs don’t provide accurate VoP and there is fraud, the liability is on them. If however the VoP comes back negative (check impossible or no match), and the payer wants to go through with the transfer, they are the ones liable in case of fraud.

Confirmation Payee CoP is an account name verification service that takes place in the UK. Before any transaction is sent to a bank account, the payer is asked to confirm the name on the recipient’s bank account. This offers protection against APP fraud. CoP works in the UK, while Verification Payee VoP is being developed in the EU.