An almost constant stream of new EU legislations and mandates hits banks and PSPs. The purpose of this is mainly to improve safety and protect customer interests. Still, for many European banks and PSPs, it gets harder to keep up - especially because the costs of the necessary (technical) improvements are skyrocketing. However, there is a condition in the new Instant Payments legislation that all European banks can benefit from almost instantly: the IBAN-Name Check.
Why did the EU commission propose to mandate the IBAN-Name Check?
Some mandates can cost banks and PSPs a lot of time and money, but they do serve a good cause. The mandate for an IBAN-Name Check is part of the EU commission's legislative proposal to remove barriers that prevent Instant Payments. Although Instant Payments technology ensures payments are processed within seconds, they are yet to be available for free at all EU banks and PSPs.
The EU wants to stimulate the use of Instant Payments with the new legislation. EU citizens can benefit substantially from (international) Instant Payments because they don't have to wait anymore for important payments like their salaries. Meanwhile, Instant Payment technology brings the whole payments industry up to gear, for without Instant Payments, delays in transfers tie up to 200 Billion euros in transit daily.
The EU now saw another chance to enhance the payment process not only by saving time and saving on money in transit, but also by improving safety of payments. They do this by mandating the verification of the match between an IBAN and the beneficiary's name with each Instant Payment [including bulk payments?]. The IBAN-Name Check is a great and low-cost way for banks and PSPs to prevent mistakes and fraud on a large scale.
How can banks and PSPs benefit from a mandatory IBAN-Name Check?
Sometimes seemingly small checks can make the most significant differences. At first glance, a 'simple IBAN-name Check' might seem relatively insignificant for the enormous security and safety systems in the world of finance.
But the devil is here, as always, in the details: if an IBAN-Name match is not checked, many mistakes can and will be made. One typo in an IBAN-Number for an international payment - and it can take a long time before the money (if ever) can be retrieved. And what about frauds, where people deliberately redirect the payment of their subscriptions and other (recurring) payments to the bank accounts of large organisations? It can take months before such frauds are detected and even longer to retrieve the lost money. Not just the companies but also banks and PSPs involved, have to make a lot of (expensive) effort to correct mistakes and identify frauds.
➔ With the IBAN-Name Check, up to 81% of related payment fraud and 67% of misdirected payments can be prevented.
These numbers are exactly why the IBAN-Name Check is not 'yet another costly mandate' from the EU. On the contrary. They are why all EU banks and PSPs can actually benefit financially from the IBAN-Name Check.
We do have some recommendations to improve the implementation and acceptance of the EU regulations for Instant Payments
Since SurePay is the founder of the IBAN-Name Check, we can modestly claim that we have a lot of experience with this safety tool for the payment industry. The IBAN-Name Check has proven to have a largely positive and instant impact on preventing APP scams and misdirected payments. To optimise the effect and improve the implementation of the legislation, we put together some recommendations ranging from increasing trust to the mandatory payer opt-out for PSPs.