91����ԭ��

Growing volumes of instant payments in Europe will bring a higher risk of fraud, as the countdown to the Instant Payments Regulation (IPR) begins this month, an executive at EBA Clearing has said.

Payment service providers (PSPs) should remember that “more instant payments could also mean more instant fraud”, Erwin Kulk, head of service development and management at the euro clearinghouse, told 91����ԭ�� in an interview.

The EU’s IPR has begun to enter into force, and PSPs now face a series of deadlines to comply with requirements including sending and receiving instant payments in euros and building a system to check IBANs against account names.

EBA Clearing, which is co-owned by major European banks, said earlier this month that it would roll out its own Verification of Payee (VoP) system by December this year. Such rules are a key part of the IPR: PSPs across the EU will need to have them in place by October 2025.  

"The primary catalyst currently driving Verification of Payee developments is the Instant Payments Regulation,” Kulk said. “Everybody is looking for technical solutions.

“Mitigating fraud is of paramount importance, although it's acknowledged that Verification of Payee won't entirely eradicate the issue,” he said. “However, it serves as a valuable tool, particularly in combating authorised push payment scams, where fraudsters impersonate legitimate individuals or institutions.” 

The need to be pan-European

Over the past few years, various approaches have emerged in different European countries. Spain has a system managed by Iberpay, while the UK’s Confirmation of Payee solution was developed by SurePay, which also created a solution in its home country of the Netherlands. 

Kulk said that it is crucial to address this issue on a pan-European scale because fraudsters are always looking to attack the weakest link. 

“They continuously seek opportunities to exploit vulnerabilities and easily move from one country to the next,” he said. “To combat fraudulent activities more effectively our users asked for a pan-European solution that they could use for all their transactions, and so they joined forces with EBA Clearing to develop one." 

Kulk continued that the effort to combat fraud is not solely motivated by regulatory pressure either. “Each PSP has its own anti-fraud solutions in place, yet instances of fraud continue to rise,” he said. “We have been observing a noticeable increase in recalls for instant payments compared to other credit transfers.”

In response to this trend, Kulk said EBA Clearing has been developing a toolset that can analyse fraud and anomaly patterns, enriching the view of existing anti-fraud systems. 

“This toolset serves as a robust mechanism to detect and prevent fraudulent activities across all transactions. It's particularly effective to bring in the network view and forms the foundation for pan-European anti-fraud initiatives like VoP,” he said. 

Network infrastructure

Eva Herskovicova, EBA Clearing’s head of operations, said that fraud is not the sole risk that needs to be addressed with the increase in instant payments.

“If transaction volumes increase significantly, networks must be able to handle the load, senders must be capable of initiating such volumes and customers must be able to receive them all in real time,” she told 91����ԭ��.

 “Much of our focus is directed towards preparing with our user community, so they can embrace this surge in transaction volumes." 

Herskovicova said that EBA Clearing has already demonstrated the same level of commitment during the ramp-up of SEPA payments mandated by the SEPA Migration End-Date Regulation, which came into force in eurozone countries on October 31, 2016.

"At that time, within a month, we successfully scaled from handling 4m to 35m transactions daily, without encountering any glitches,” she said. “This achievement is noteworthy, especially considering the industry-wide scope of the SEPA migration.”

In preparation for the IPR deadlines, Herskovioca said that EBA Clearing will again place a focus on conducting extensive testing across the entire process, ensuring that every aspect necessary for the smooth execution of instant credit transfers is addressed. “It's crucial to manage expectations throughout this process." 

A volumes game

The growth trajectory of instant payments differs from one country to the next, as the adoption approach varies. There are countries in the EU that have already embraced instant payments, such as the Netherlands and Lithuania, but there are also countries where uptake has been much slower, such as Italy. 

Herskovicova said the channels where instant payments are used to settle credit transfers are different from one community to another as well. 

“While some communities have already embraced instant payments, sending over 50 percent of their credit transfers in real time, others still rely heavily on regular credit transfers,” she said. 

Herskovicova said she expects both payment methods to coexist for a considerable period, especially as batch payments are very robust, liquidity efficient and well embedded into corporate processes. “Based on user feedback, expectations for the migration of credit transfers to instant payments range from 15 to 50 percent for the coming years."

Kulk said the industry is focusing on use cases where features like immediate availability of funds and 24/7 processing can provide the most value. 

“It's essential to identify these areas where value can be created for users. The transition may take time, and some PSPs may adopt instant payments more rapidly than others,” he said. “It's also often easier to develop new systems than to phase out existing ones."