Europe’s Payee Checks Set the Pace as US Plans Take Shape

Payee verification systems are being integrated into payment workflows across Europe and the United States to bolster security and reduce fraud. IPID, a company focused on account verification, recently raised $16 million in Series A funding to expand its account verification network across more than 50 countries. This funding will help the company implement its verification capabilities in the U.S. and Europe, as well as cover digital assets like cryptocurrencies.

In Europe, the Instant Payments Regulation mandates that payment service providers provide Verification of Payee for standard and instant euro credit transfers. This verification process verifies whether the account identifier and intended payee match before the payment is initiated. The U.S. is also developing its own payment verification capabilities, such as the Federal Reserve's Payee Name Verification, which allows financial institutions to cross-check an intended payee's name against routing and account information before issuing a payment.

Real-time payee verification has been shown to be effective in detecting fraud. According to a PYMNTS Intelligence report, 60% of firms using real-time account ownership verification detected suspected fraud instantly or within minutes, compared to 39% of firms that didn't use real-time verification. Additionally, real-time verifiers were more than twice as likely to detect fraud before money moved, at 21% versus 10%.

As payments move across different markets with varying account formats and verification arrangements, payee verification services are being built into the payment preparation and release stages. This allows banks to carry out recipient verification throughout payment flows, even those that no longer stop at national borders. By connecting verification services across domestic systems, banks can better manage cross-border payments and reduce the risk of fraud.