In an age where digitisation is taking over, better security and accuracy of financial transactions is a must.
To address the modern cybersecurity measures in financial domain, the European government has released its Verification of Payee (VoP) guidelines to revolutionise the banking system across Europe.
Here’s how VoP could be changing things for financial and safety precision:
What is Verification of Payee?
Verification of Payee (VoP) will play an important role in the new Instant Payment Regulation (IPR). It is created with rules, practices and standards adhering to an inter-payment service provider (PSP) to prevent immediate and irrevocable transfers from happening under the Single Euro Payments Area (SEPA) credit transfers.
How does VoP work?
The Verification of Payee is a scheme developed by the European Payment Council to prevent payment fraud. It involves improving customer satisfaction and building trust in SEPA account-to-account transfers with immediate feedback on the payee verification.
- The payee verification scheme allows the Payment Service Provider (PSP) of the payer (the Requesting PSP) to instantly send to the PSP of the payee (the Responding PSP), a request for payee IBAN and name verification as given by the payer (the Requester).
- In addition, an unequivocal identification code (e.g., Value-Added Tax (VAT) number, a Legal Entity Identifier (LEI), social security code) about that payee. The reason behind this is that the payer intends to initiate a SEPA Credit Transfer (SCT) or a SEPA Instant Credit Transfer (SCT Inst) transaction with the payee.
- The Responding PSP will then instantly verify whether the received data aligns with the concerned data registered for that payee at the Responding PSP.
- The Requesting PSP will immediately be informed by the Responding PSP with a VOP response (e.g., match, no match, or close match with the payee, match/verification check not possible).
- The Requesting PSP then immediately passes on the response to the payer to avoid misdirected payments.
The Verification of Payee (VoP) routing and verification mechanism is advanced and secured enough to reduce APP scams across the entire European Union.
What does the Implementation of Verification of Payee mean for Europe?
This brings along with it a minimum VOP service level that ensures pan-European acceptance and reach. VOP solutions or schemes must come with an interoperability “by design”.
The implementation is supported by PSPs of an EU legislative obligation that offers VOP services to their customers to avoid misdirected payments from happening due to fraudulent partners.
The Benefits of VoP for Businesses
The sharing data can be gathered by businesses to study their target audiences and used to create custom outlines to build loyalty.
- To ensure pan-European acceptance and reach can be achieved, it establishes a minimum level of VOP service
- Ensures as much possible real-time data exchange “by design” with any existing VOP solutions or schemes
- Adoption of the scheme across Europe means businesses can get access to data on a wider scale
- It prevents misdirected payments saving cost and time
- Improves the end-user experience and trust in SEPA Instant Credit Transfers
Verification of Payee API
Verification of Payee API is a technology that helps you leverage the power of VoP in your existing payment software. You can simply integrate the TechnoXander VoP API in your current digital payment solution to use all the VoP functionalities without affecting or changing your existing facilities.
Many companies are building Verification of Payee (VoP) solutions but many others do not have required resources to build a VoP supporting software. Hence, these companies can use this Verification of Payee (VoP) API integration to make secure payment transactions.
What is Routing and Verification Mechanism (RVM) in VoP?
RVM, or Routing and Verification Mechanism, is a critical component of the Verification of Payee (VoP) process in Europe. It works as a bridge between different schemes and solutions for PSPs. RVM involves a series of steps to validate the payee’s identity and account details before authorizing a transaction.
RVM (Routing and Verification Mechanism) is like a gatekeeper for your money. When you want to send money to someone, RVM checks to make sure it’s going to the right person.
For Example:
Imagine you’re sending a letter to a friend. You’d write their address on the envelope. RVM is like the postal worker who checks the address to make sure it’s correct and sends the letter to the right place.
Similarly, when you send money, RVM checks the recipient’s bank account number and other details to ensure it matches the person you’re trying to pay. This helps prevent mistakes and keeps your money safe.
How does RVM work?
- Data Collection: The RVM collects essential information from the payer, including the payee’s name, account number, and bank details.
- Data Validation: The RVM verifies the accuracy and consistency of the collected data against reliable databases and reference sources.
- Routing: Once the data is validated, the RVM determines the appropriate routing path for the transaction based on the payee’s bank and location.
- Verification: The RVM sends a verification request to the payee’s bank to confirm the accuracy of the account details and to obtain additional information if necessary.
- Authorization: If the verification is successful, the RVM authorizes the transaction to proceed.
Verification of Payee Technology for Organisations
The use of Verification of Payee technology is not limited to banks and financial institutions. Every organisation transferring salaries and sending money every month for various assets can also add an extra protection layer on all transactions by integration Verification of Payee (VoP) solution in their existing payment software.
Verification of Payee (VoP) Deadline in Europe
According to the officials, the Verification of Payee (VoP) deadline in Europe is 9 October 2025. However, we highly recommend that organisations must not wait till the last date and get a Verification of Payee (VoP) solution for their financial software.
Getting VoP is not essential only to address the government’s directives but also to safeguard your financial services in every aspect. Hence, we recommend all banks, financial institutions, and money exchange service providers to either build their VoP solution or get it from a verified and established fintech company to safeguard all their financial services.
Verification of Payee Vendors in Europe
You can find many Verification of Payee vendors across the European Union countries. However, we recommend opting for an experienced VoP vendor approved by the payment associations or authorised by any government entity.
Moreover, checking the background of the Verification of Payee vendor is equally important as you will not want to choose an unexperienced VoP vendor. You can try contacting companies like TechnoXander, which has a decent experience in developing and delivering open banking, Confirmation of Payee and Verification of Payee solutions.
The challenges EU might face while implementing VoP
Like any other government directive, Verification of Payee (VoP) implementation comes with a few challenges that you can check below:
- Technical Difficulties: Adding VoP on site of an existing system would require careful coordination and planning. It would require PSPs and the banking system to work together to ensure the effectiveness of the scheme.
- Acceptance: Getting consumers to adopt the scheme is crucial for the success of the scheme. Otherwise, it may result in a similar failure experienced by the UK with its Open Banking scheme.
- Financial Inequality: Varying economic conditions across European countries could mean that not all regions can afford the required integrations and upgrades.
Rules to be Followed in accordance with the Guidelines
A set of inter-PSP rules and requirements are set for a smooth operation under the scheme;
Eligibility of Participants
- Partners of the scheme must be licensed PSPs in SEPA-authorised countries
- The applicant must be financially sound and meet solvency and liquidity requirements as well as other financial and regulatory requirements including anti-money laundering requirements and risk control measures.
Requirements for Operation
- Users can operate services using Routing and Verification Mechanisms (RVMs) or Intermediary PSPs.
- Must be able to operate in compliance with the scheme and be reachable across SEPA.
- Handle situations pertaining to reachability.
Partner Responsibility
- Comply with the processing rules for VoP applications and answers.
- Ensure that all linked employees and agents act in accordance with the Rulebook.
In a nutshell, the Verification of Payee has the potential to change financial transactions in Europe for the better and make them more secure and trusted. Sure, there is no denying that there will be obstacles around implementation costs and technical issues, but its users will reap the benefits of its placement in SEPA.
Verification of Payee (VoP) Experts at TechnoXander
Verification of Payee (VoP) is undeniably a great reform in the financial market to minimise APP scams. However, finding a suitable Verification of Payee (VoP) expert is another big challenge. To overcome this, TechnoXander, with its extensive expressing in offering banking solutions has built a Verification of Payee (VoP) API for every business. Below are some highlighting features of our VoP API:
- API-driven solutions
- Sandbox support
- Real-time analytics
- Simplified reporting
- User-friendly interface
With reduced fraud, increased verification and validation in real-time, and better customer confidence, VoP can become the go-to for digital banking in the EU. So yeah, it’s not going to be easy, but let’s see the change it brings to secure payments in Europe! Exciting times ahead!
Don’t wait – enhance your payment security with Verification of Payee (VoP) today, our experts at TechnoXander are there for your assistance.
