Understanding FPAD: A Game-Changer for European Banks

Blog· 3min October 5, 2023

The European banking landscape is undergoing a significant transformation, with the recent publication of the initial views on the scope and requirements under PSD3 shaping the markets direction on improving and enhancing the payment ecosystem. Whilst PSD3 is drawing a lot of focus, with the introduction of the Fraud Pattern and Anomaly Detection (FPAD) functionality, which is being spearheaded by EBA CLEARING, looks to augment and enhance how Financial Institutions manage and mitigate the risk from payment fraud.

What is FPAD?

FPAD stands for Fraud Pattern and Anomaly Detection. It's a pan-European initiative designed to provide real-time fraud prevention and detection tools. There are 2 clear component parts regarding FPAD, which are: 

  • The introduction of a IBAN verification check – it is expected that this will work in a similar way to the Confirmation of Payee (CoP) scheme in the UK which has played a material role in the introduction of effective friction to discourage customers from being a victim of Fraud. 
  • The creation of a Fraud detection model, which is looking to determine probability of fraud risk on a payment, based upon based performance and attributes within the payment message. 

Collectively, these 2 parts are gearing towards the objective to enable users of STEP2 and RT1 systems to complement their individual risk views with insights on patterns and anomalies from a central infrastructure level perspective.


EBA CLEARING has been at the forefront of this initiative, recently announcing the issuance of specifications for the FPAD functionality. Alongside this, they've also launched a developer portal, complete with a sandbox, to aid users in the development and testing of FPAD’s application programming interfaces (APIs). 

The development of EBA CLEARING’s FPAD functionality began in early 2023, following the release of a blueprint and subsequent RT1 and STEP2 user consultation in Q4 2022. Both STEP2 and RT1 are pan-European retail payment systems that process SEPA Credit Transfers and Direct Debits (STEP2) and SEPA Instant Credit Transfers (RT1) respectively. These systems are owned and operated by EBA CLEARING, a European-owned, European-governed, and European-regulated financial market infrastructure provider. 

The Analytical Pilot Phase

The summer has seen preparations for the FPAD functionality go-live intensify. Nine banks from six countries have been actively contributing to the data model training of the ongoing analytical pilot phase. The primary aim of this pilot is to develop models that identify fraud patterns in collaboration with users and to qualify anomalies based on their feedback. 

Erwin Kulk, Head of Service Development and Management at EBA CLEARING, expressed gratitude for the active engagement received from the analytical pilot banks. He emphasised the value created for all STEP2 and RT1 users from day one, with the delivery of the specifications and the developer portal. 

What Does This Mean for European Banks?

The introduction of FPAD is set to be a game-changer for European banks. Raphael Barisaac, Global Head of Payments & Cash Management at UniCredit SpA, highlighted the importance of payment systems security. He noted that with the rapid growth of instant payments, there's a pressing need for enhanced security and better fraud-fighting tools. FPAD, he believes, represents a systemic approach where banks across Europe are joining forces to elevate fraud-fighting capabilities within the SEPA perimeter. 

Similarly, Enrico Canna, Head of Anti-fraud & Customer Protection Center at Intesa Sanpaolo, emphasised the importance of a shared international solution like FPAD. He believes that real-time information sharing and data correlation will significantly enhance customer protection. 

FPAD and APIs: A Match Made in Banking Heaven

The FPAD initiative, powered by APIs, represents a significant leap forward for European banks. It's not just about detecting fraud; it's about creating a more integrated, efficient, and secure banking ecosystem. As instant payments become the norm, the need for real-time fraud detection tools like FPAD becomes even more critical. 

However, it's essential to note that while the FPAD initiative is a promising step forward, its successful implementation hinges on how banks connect to it. Many financial institutions, especially those without an API-first technology stack, face challenges due to their legacy payment architectures. These older systems can be cumbersome, less flexible, and often not designed for the rapid integration that APIs offer. 

For these banks, transitioning to an API-driven approach isn't just about staying competitive; it's a necessity for seamless integration with advanced systems like FPAD. The move to modernise and adopt API-first strategies will ensure they can fully leverage the benefits of FPAD and other similar initiatives in the future. 

As Erwin Kulk from EBA CLEARING mentioned, the active engagement from analytical pilot banks is training the fraud pattern and anomaly detection models. These models, powered by APIs, will be used for each settled transaction to detect matching fraud patterns and anomalies. 


The introduction of FPAD is a testament to the collaborative spirit of European banks. It's a clear indication that the banking sector is taking proactive steps to combat fraud, ensuring the safety and security of customers. With FPAD, European banks are not just enhancing their fraud detection capabilities but also setting a benchmark for the global banking community. 

As the landscape of banking and finance continues to evolve, initiatives like FPAD will play a pivotal role in shaping the future. For banks, service providers, and customers alike, it's a step towards a safer, more secure financial ecosystem. 

Find out how Form3's single API integration can future proof you against regulatory change.