Verification of Payee Deadline: What Banks Must Do to Meet EPC Requirements

Thought Leadership· 3min March 4, 2025

With the verification of payee deadline looming, the European banking community must race to make the necessary system upgrades to ensure the secure and real-time validation of transactions. The new regulation is going to change the way you make payments. This article will take you through the upcoming scheme changes. We will cover the rules about payments, the challenges of automating payments and the solutions to better payment security  Can your institution afford to ignore these changes? Read on to find out why now is the time to act. 

Understanding the Verification of Payee Deadline 

The verification of payee deadline is not just another compliance date on the calendar—it’s a pivotal moment for the entire payments industry. Scheduled for October 9, 2025, this deadline mandates that banks and payment service providers (PSPs) implement a robust, real‐time verification process across all transaction channels. This initiative goes beyond merely checking an account name against an IBAN; it’s about creating a secure, unified payment scheme that spans online transfers, telephone payments, and even traditional paper transactions. 

Imagine the risks: a simple typo in an account number can lead to a misdirected payment that might be impossible to retrieve. The new system is designed to prevent such costly errors by ensuring that every transaction is verified in under five seconds. By standardising the process across Europe, the deadline aims to enhance fraud prevention, reduce financial losses, and boost consumer confidence in digital payments. In essence, it’s a race against time where every millisecond counts. 

VOP Regulatory Framework and Compliance Requirements 

At the heart of this transformation is the regulatory framework set forth by the European Union. The Verification of Payee (VoP) initiative is driven by the Instant Payments Regulation (IPR) and a host of new mandates aimed at creating a single, unified standard for all PSPs across Europe. But what does this mean for your institution? 

The new rules require the all-out assessment before any payment is authorised. This means there should be a validation that the payee details match 100% for any transaction. Additionally, European Payments Council (EPC) Regulatory bodies have developed the EPC Directory Service and this directory service is a centralised ‘phone book’ for their bank accounts that will be launched for new verification. 

In addition, as far as the SEPA credit transfers are concerned, the second deadline is October 9, 2025. This one is pretty much similar, but slightly staggered so as to give a brief leeway for institutions who still work on legacy systems. It’s crucial to comply with these requirements, or else you may face undesirable penalties. However, you would also lose the trust of your customers. 

Technical and Operational Payment Challenges 

Implementing a system that verifies every transaction in under five seconds is no small feat. For many banks, especially those relying on legacy systems, this deadline presents a substantial operational challenge. The verification process involves a series of steps, starting with the transmission of payment details to the central EPC Directory Service, and ending with a real-time response confirming or denying the match. 

How do you integrate cutting-edge technology with systems that were not originally designed for such rapid processing? The answer lies in overcoming several technical hurdles: 

01

Legacy Systems Integration: Many banks are still running on outdated infrastructure. Upgrading these systems to interact seamlessly with modern APIs is a complex, resource-intensive process.

02

Speed Requirements: Each transaction must be verified in less than five seconds. This is particularly challenging for high-volume processes such as payroll or large-scale commercial transactions.

03

Routing and Verification Mechanism (RVM): The new RVM is a critical component that governs how VoP requests and responses are handled. Ensuring its flawless operation requires rigorous testing and integration with the EPC Directory Service, which itself will only be fully operational by June 2025—leaving banks with a tight three-month window for full-scale implementation.

04

Customer Experience: Explaining the nuances of a ‘close match’ to customers over the phone within seconds is another layer of difficulty. Institutions must train staff to manage these situations efficiently, ensuring clarity and maintaining customer trust even during brief disruptions.

Impact on Consumers and Financial Institutions 

What significance does this hold in the daily operations of financial companies and their clients? A standard verification procedure being introduced will surely be highly beneficial for both. 

For consumers, the benefits are clear. A good verification process will lessen the chance of payment being misdirected or fraudulent incidents. As a result, making digital payments is more secure and gives us more peace of mind. In today’s world of instant payments, it is extremely important that every payment is fast and safe. 

For financial institutions, the stakes are equally high. In order to comply with the last date for verification of payee, substantial financial outlay on new technology, systems upgrade and staff training will be needed. However, institutions that enact such changes will be in a better position to reduce the risk of loss, build customer relationships and earn their trust. The initiative to one secure payment system will help in building customer trust as well as the institution's reputation. 

Essentially, much-needed evolution of payments can happen only because of the deadline of verifications of Payee. Upon embracing these changes, banks can become the leaders of the new digital economy – one that is ready to deal with today’s and tomorrow’s challenges.  

Preparing for the Verification of Payee Deadline: Key Takeaways 

As we approach this transformative deadline, what steps should financial institutions take to ensure they are ready? Let’s recap the critical actions and considerations: 

01

Immediate System Assessments: Conduct thorough evaluations of your current systems to identify gaps that might hinder compliance with the under-five-second verification requirement.

02

Plan for Legacy Integration: Develop a clear strategy for upgrading or integrating legacy systems with modern APIs and the EPC Directory Service.

03

Leverage Innovative Tools: Take advantage of pre-compliance tools like FPAD and consider partnering with third-party providers who offer ready-made solutions.

04

Staff Training: Ensure that your team is well-prepared to manage the new verification processes and can communicate effectively with customers about any changes.

05

Compliance and Testing: With the EPC Directory Service going live by June 2025, use the three-month window to rigorously test and refine your new systems.

06

Engage with Regulatory Updates: Stay informed about any new guidelines or updates from regulatory bodies to ensure ongoing compliance.

By focusing on these key areas, financial institutions can turn the verification of payee deadline from a daunting challenge into a strategic opportunity. Isn't it time to embrace the future of secure, efficient payment processing? 

Conclusion 

In short, the verification of payee deadline will change the digital payments landscape of Europe. A deadline implying activities such as SEPA credit transfer must comply with the requirement till October 9, 2025. Banks and PSPs has to step up and preparation for a full rollout with compliance.  It will be difficult journey involving extensive technical enhancements, system linkages, and personnel instruction and training. But the advantages—a more reliable, standardised payments ecosystem and greater trust from consumers—outweigh these initial hurdles. 

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