International payments are reaching unprecedented speeds, driven by advancements in technology, an increased focus on customer needs, and initiatives such as the G20’s roadmap for cross-border payments. Transactions that once took days are now completed in hours, with almost 90% of cross-border transactions on Swift being processed in under an hour.
While this progress is remarkable, it brings new challenges - particularly the heightened risk of fraud. As customers expect cross-border payments to be as swift as domestic ones, the rapid pace can complicate fraud detection and prevention.
Banks are on the brink of a significant transformation in their technical operations to accommodate 24/7 instant payments following the introduction of the EU Instant Payments Regulation in 2024. Yet, as the European financial community prepares to comply, achieving interoperability between payment verification systems remains a significant challenge.
Speed backed by security
Pre-validating payments for errors and anomalies before processing is essential for balancing speed with security. Swift’s Payment Pre-validation service, which allows banks to verify payee details before sending payments, has already reduced a significant friction point in cross-border transactions, saving the industry over $2 billion annually. With the EU Instant Payments Regulation accelerating payments’ speed across SEPA zone, it is crucial that domestic confirmation of payee schemes can interoperate with one another so that friction doesn’t hinder speed.
The regulation not only ensures that instant euro payments are fully accessible within the EU and EEA but also mandates that banks and PSPs charge no more for instant payments than for standard credit transfers. Crucially, the regulation includes safeguards to ensure that the increased use of instant payments does not introduce additional risks. Under the new rules, providers must verify that the IBAN and payee name match, alerting customers to potential fraud or errors before transactions are completed.
Tackling the interoperability challenge
While the Instant Payments Regulation aligns with the G20 roadmap for cross-border payments, lack of interoperability among VoP systems could still cause friction. Around the world, domestic and regional instant payment systems are rapidly expanding, and pre-validating beneficiary details is one way of ensuring speed does not come at the expense of security.
The concept of pre-validating transactions to reduce fraud and errors is not new—several European countries have already introduced VoP systems. However, these systems face obstacles in cross-border contexts. For example, France uses SIREN or SIRET codes, while Italy relies on tax IDs. Achieving interoperability in VoP systems is a crucial step in creating an instant and frictionless global payments ecosystem.
For the regulation to have a scalable impact, a unified approach is necessary to enable seamless interaction among various regulations, standards, and instant payment systems.
Paving the way for scalable impact
Swift is working with its network of banks and financial institutions to support compliance with the regulation by promoting interoperability among VoP systems. This extends the reach of beneficiary checks to cross-border payments customers.
What’s more, the breadth and richness of the data on the Swift network has already empowered multiple Confirmation of Payee providers across Europe to unlock the benefits of instant and secure payments for a wider audience. EBA Clearing has been one of the first market infrastructure providers to support APIs over Swift, and this access can now be leveraged by PSPs to connect to EBA Clearing’s Fraud Pattern and Anomaly Detection functionality. And CBI, an Italian company that develops digital services - including open banking and open finance services - for the financial industry, is expanding its Confirmation of Payee services to the European level and beyond through the use of Swift’s Payment Pre-validation service. In France, SEPAmail.eu (part of STET Group) – with its IBAN Name Check solution used by the French community – is taking a step further in its current interoperability capabilities by leveraging Swift to extend the reach of VoP systems across Europe and beyond, while Dutch fintech SurePay is leveraging the cooperative’s vast network of banks to enrich its CoP/VoP offering to bring the benefits of its enhanced Verification of Payee service to a broader European and global audience.
Swift’s enhanced Pre-validation solution acts as a central ‘hub,’ connecting domestic VoP schemes and ensuring senders have confidence in beneficiary data accuracy. Connecting these disparate European VoP schemes lays the groundwork for VoP interoperability across Europe and beyond, and when combined with Swift’s vast global reach, gives the European banking community an opportunity to significantly reduce friction within the payments ecosystem and drive the industry towards the G20’s goals for speed and transparency in cross-border payments.
Through Swift’s network, banks and financial institutions can comply with the EU VoP mandate via their existing Swift connections, improving the customer experience. Swift’s research shows that over 80% of SMEs value upfront recipient verification. Furthermore, Swift’s solution will be compliant with the European Payment Council (EPC) Verification of Payee scheme and have the ability to query the EPC Directory Service - a key component of the scheme.
The EU is proving that instant payments are achievable without compromising security. However, ensuring that SEPA payments seamlessly integrate with global systems remains a challenge. As instant payments grow worldwide, the regulation presents a unique opportunity for global harmonisation. By unifying diverse standards, regulations, and networks, we can build a future where money moves instantly and effortlessly across borders.