The EU’s Instant Payments Regulation[1] (IPR) introduces a major new obligation for payment service providers (PSPs) across Europe: the Verification of Payee (VoP). This measure is designed to enhance trust and security in payments, particularly in the fight against fraud.
In this article, we unpack the main aspects of the VoP requirement, based on the IPR’s provisions.
Table of Contents
1. When will VoP be mandatory?
VoP will be mandatory from 9 October 2025 for all Euro-area PSPs that offer credit transfers (instant or standard). This includes banks, payment institutions, and e-money institutions.
PSPs outside the euro area have additional time until 9 July 2027 to offer instant payments in Euro and to perform VoP.
The EPC (European Payments Council) has released a dedicated VoP Scheme Rulebook, which will enter into force on 5 October 2025, shortly before the regulatory deadline.
2. What is the link with IBAN check?
VoP is essentially an IBAN-name consistency check. It ensures that the payee name entered by the payer matches the name associated with the IBAN at the receiving PSP.
This mechanism helps prevent:
- Fraud (e.g., authorized push payment fraud or impersonation fraud).
- Payment errors due to incorrect IBAN input.
Think of it as a security control that confirms whether the entered beneficiary details match the actual account holder.
3. What will change for the payment service user?
For most users, especially individuals and SMEs, the changes will be minimal but beneficial:
- Additional confirmation step which helps to avoid misdirected payments: when entering a beneficiary’s name and IBAN, users will see a confirmation result, such as:
✅ “Match” – the name and IBAN correspond.
⚠️ “Close match” – names are similar but not exact (user can proceed after acknowledgment).
❌ “No match” – names don’t match; user is advised to double-check or cancel. - No Need to Opt-In: Users do not need to request VoP; it will be integrated into the PSP’s payment interface (online banking, apps, APIs, etc.).
- Increased Fraud Protection: The service adds an extra layer of security by reducing the risk of sending money to the wrong recipient.
4. Will VoP be free of charge for the payment service user?
Pursuant to Article 5b of the IPR, VoP will indeed be free of charge.
This means:
- PSPs cannot charge retail or business users for VoP services, and
- Any associated costs must be absorbed by the PSP as part of their compliance obligations.
5. What are the typical challenges arising when performing the VoP checks?
The following technical and operational challenges may occur:
Name Matching Logic:
Names may have different formats, typos, use of abbreviations, or order variations. Developing robust fuzzy matching algorithms that distinguish real mismatches from minor inconsistencies might be difficult.
Data Quality:
Inaccurate or outdated customer information on file (e.g., legacy systems) can lead to false “no match” results.
Customer Friction:
Users may find “no match” warnings confusing or annoying—especially when dealing with legitimate recipients using nicknames or trade names.
Real-Time Requirements:
For instant payments, VoP results must be delivered within seconds—requiring high system performance and availability.
Real-time requirements can also be affected by the restrictive measures which may be imposed on counterparties. Indeed, since PSPs are required to screen the payer and the payee of a transaction in order to ensure that they are not subject to an asset freeze or a prohibition on making funds or economic resources available to it, there is an established practice of screening every transaction to ensure that none of the parties are subject to restrictive measures.
This entails added costs and a delay in the speed with which credit transfers can be settled. Instant payments make this screening even more difficult, thus leading to a large number of rejected transactions whenever parties to a transfer are flagged as being potentially subject to restrictive measures.
Cross-border Interoperability:
Consistency in VoP implementation across member states and PSPs is essential. The EPC VoP Scheme provides a harmonized approach but needs broad adoption to ensure success.
6. What if the payee uses a trade or business name?
If the counterparty is a legal person, the following attributes may be used as an alternative to its name in order to obtain a match with the account number:
- “Legal Entity Identifier” or “LEI” which is a unique alphanumeric reference code based on the ISO 17442 standard assigned to a legal entity;
- The commercial or business name of the counterparty; and
- Fiscal numbers such as the VAT number.
7. Is participation in the EPC’s VoP scheme mandatory?
Participation in the VoP scheme developed by the EPC is not mandatory
However, although participation in the EPC VoP Scheme is voluntary, compliance with the VoP obligation itself remains mandatory under the IPR.
The EPC scheme offers a harmonized framework that enhances interoperability, making it the preferred implementation model.
8. What if the payee is subject to restrictive measures (e.g., Sanctions)?
VoP is not a sanctions screening tool—but it can support sanctions compliance in certain ways:
- A positive VoP match does not imply the payee is legally eligible to receive funds.
- If the payee’s account is frozen or subject to restrictive measures, the transaction may still be blocked after the VoP result, based on separate AML/CFT or sanctions screening procedures.
In practice, VoP is a complementary control, not a substitute for transaction filtering or compliance screening under EU sanctions regimes.
As mentioned above, the screening that a PSP must perform with regard to restrictive measures can impact the provision of instant credit transfers and lead to numerous failed transfers due to matches with payee potentially subject to restrictive measures.
In order to avoid any delay in the execution of instant payments and to increase legal certainty, Article 5d of the IPR states that the payer’s PSP and the payee’s PSP involved in the execution of an instant credit transfer shall not verify whether the payer or the payee whose payment accounts are used for the execution of that instant credit transfer, are persons or entities subject to targeted financial restrictive measures.
The PSP involved in an instant credit transfer should instead:
- implement daily screening of their clients to ensure they are not subject to restrictive measures; and
- screen its clients immediately after entry into force of any new targeted financial restrictive measures.
9. What is the challenge of VoP in the context of factoring activities?
Factoring and invoice financing may, depending on the form, involve (i) the assignment of receivables to a third party, i.e. the factor, and (ii) payment instructions that direct funds to the factor’s account, rather than the original supplier.
This may introduce a mismatch between:
- the invoice name (original creditor), and
- the account holder name (factor or assignee).
As a result:
- VoP may return a “no match” or “close match”, even though the payment is legitimate.
- PSPs and factoring companies need to coordinate registration of alias or trade names, or explore technical solutions such as pre-authorized exceptions or white-listed accounts.
This is a recognised challenge and may require further regulatory guidance or industry alignment.
Conclusion
Verification of Payee under the IPR is a regulatory shift aimed at reducing fraud and increasing payment accuracy. While it poses practical and technical challenges for PSPs—especially in complex areas like trade finance or compliance—it strives for a safer, more trustworthy payment environment for all users.
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[1] Regulation (EU) 2024/886 of 13 March 2024 amending Regulations (EU) No 260/2012 and (EU) 2021/1230 and Directives 98/26/EC and (EU) 2015/2366 as regards instant credit transfers in euro
