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The European Payments Council (EPC) has released onboarding and registration guidelines for its EPC Directory Service (EDS), allowing payment service providers (PSPs) to move a step closer to compliance with the EU’s Instant Payments Regulation (IPR).
The guidelines offer step-by-step instructions for PSPs and routing and/or verification mechanisms (RVM) that plan to participate in the Verification of Payee (VOP) scheme, helping them register to use the EDS via the EDS graphical user interface (GUI) and application programming interfaces (APIs).
The IPR mandates that PSPs offer a VOP service to all credit transfers, including instant ones.
The VOP scheme aims to ensure that funds are sent to the intended recipient by matching the IBAN with the name of the payee, and should alert the payer to any discrepancies before they authorise the payment.
The guidelines include an introduction to the EDS and its role within the VOP scheme, instructions for setting up and linking Swift accounts, and guidance on onboarding through both the EDS interface and APIs.
The purpose of the EDS is to allow PSPs to publish their web addresses/URLs, meaning that they can safely send and receive payment requests.
PSPs can either manage and access VOP directly, or rely on support from RVMs.
The VOP scheme
The VOP scheme is set to launch on October 5, 2025 and is intended to enhance payments security across the Single Euro Payments Area (SEPA)
Under the system, when a payer attempts to send a payment, their PSP sends a request to the receiving PSP with the payee’s IBAN and either their name or an identification code such as a VAT number.
The receiving PSP returns either a match, a no match or a close match. This information goes to the payer, who can then decide whether to proceed.
Where there is a close match between the IBAN and the name provided, the payer is given the name associated with the IBAN.
The whole process should take no longer than five seconds.
The scheme is similar to the UK’s Confirmation of Payee (COP), which has been in effect since 2020.
Under COP, banks can check the name, sort code and account number on a new payee’s account, meaning individuals setting up a new payee can confirm that the name they have entered matches the one on the account they intend to pay.
As with VOP, the payer is notified of a match, a close match or no match, allowing them to decide whether to proceed.
Fighting fraud
Although the VOP scheme will stop accidental misdirection of payments, arguably its key objective is to prevent fraud.
Authorised push payment (APP) fraud, where a victim voluntarily transfers funds to a fraudster, is a significant problem in the EU and elsewhere.
Common typologies include purchase scams, where a consumer pays for an item or service, but never receives it; romance scams, where a criminal adopts a fake online persona to groom a victim into sending money; and CEO scams, where a scammer impersonates the CEO or senior manager at an organisation and persuades an employee to transfer funds.
With the IPR aiming to make instant payments “the new normal” in the EU, there are concerns that the speed of the process will lead to a rise in APP fraud.
The VOP scheme should play a key role in preventing this, by giving payees the opportunity to make a decision on whether to proceed with a payment, knowing that the details may not be accurate.
For PSPs, performing the verification process correctly means that liability for incorrect transfers is waived, whereas failure to meet the verification requirements obligates the PSP to refund the payer.
Payments firms should therefore prioritise successful implementation of the scheme, and the latest guidelines will take them a step closer.
