Banks and corporates should embrace VoP solutions – here’s why

As the European Payments Council introduces Verification of Payee (VoP) to secure instant payments, this blog series has looked at why banks are considering opt-outs in article As Verification of Payee deadlines approach, hesitation could generate serious risk  and exploring the risks linked to that decision in article Some think they can delay introducing Verification of Payee – here are the risks …. In this last blog, Nicoline Lilletvedt, Lead Offering Manager at Tietoevry Banking, says banks, both retail and corporate should embrace VoP at the earliest opportunity.

The world-wide adoption of instant payments by businesses and individuals over the next five years will be transformative. By 2030, one in three payments world-wide will be instant, and likely more in developed regions such as Europe – in Asia, one in four (24%) payments are already instant[1]. These facts make securing instant payment vital. That’s why we’re pleased to play a role alongside Movitz Payments as a registered provider of end-to-end Routing and Verification Mechanism (RVM) services to support banks introducing VoP solutions. VoP will help to reduce fraud, cut the number of misdirected payments and keep instant payments secure, smooth and safe.

In our recent discussions with banks covered in our previous article, it’s become apparent that bank concerns around the introduction of VoP focus on four areas. This include remaining compliant with national Data Privacy laws, especially in non-EU SEPA markets such as Switzerland and Norway; concerns over implementation costs for VoP solutions, and the impact of VoP on processing times. Below, I explain why implementing VoP as soon as possible is the smart choice to deliver modern payments services while reducing risk and remaining compliant.

VoP solutions are consistent with GDPR and other privacy laws

“banks do not need to store extra data – they simply verify payee details against trusted sources.”

Dealing first with concerns about national Data Privacy laws, banks are right to see compliance as a priority. However, VoP solutions are designed to align with GDPR and national privacy laws while enhancing payment security. Having been implemented in the Netherlands and the UK since 2017/2018, both markets have managed to operate VoP while remaining compliant with existing GDPR and other data privacy regulations. Registered RVM providers such as Tietoevry Banking are there to provide secure data handling on behalf of banks, meaning that banks do not need to store extra data – they simply verify payee details against trusted sources.

VoP reduces cost and risk: the cost/benefit analysis is positive

If banks are worried about the costs of implementing VoP solutions, they should remember that those delaying VoP implementation will bear full liability for instant payments fraud from 2028 onwards. In Sweden, payments fraud is now estimated to cost around 2.5% of the country’s annual GDP[2], while in the UK, 80% of losses from one form of fraud were directly linked to instant payments[3]. These statistics imply that reimbursing fraud after 2028 would cost far more any near-term VoP investment.

Furthermore, banks don’t need to execute a complete systems overhaul to introduce VoP: rather, they can adopt VoP on a stepwise basis, integrating it with existing payment infrastructures. Finally, it’s worth bearing in mind that VoP automates and streamlines verification processes, reducing the need for costly manual fraud and payment resolution procedures. Overall, it’s likely a bank would see longer-term cost reductions by implementing VoP, once reduced manual procedure costs and lower fraud losses are included.

Implementing VoP is a competitive advantage – and could become table stakes

Alongside our conversations with banks, we’ve spoken to corporate clients who could be a trigger for the banks in addopting VoP.  As we discuss in an earlier article, bank corporate clients are concerned about VoP causing processing delays and raising costs. In fact, VoP is a smart investment for banks – on behalf of their clients – in many ways, not least because VoP will dramatically reduce payment errors that typically cost SMEs up to 4% of their annual revenues[4]. In addition, the liability shift to banks that do not implement VoP from 2028 will be passed on to their clients, making clients responsible for secure payment practices that reduce risk.

Seen in this context, VoP is a competitive advantage for banks presenting their payments services to corporate clients. Businesses that want secure, smooth payments – both batch file payments, and single transactions – will prefer banks offering VoP. As VoP becomes part of a growing number of bank offerings, it’s likely to become table stakes – that is, a basic part of what corporate clients expect as a minimum from their banking provider.

VoP improves payments processing

“modern VoP implementations can verify multiple payments in a fraction of a second – a complete paradigm shift from time-consuming manual or semi-automated processes.”

Finally, concerns have been expressed that VoP could slow down payments processing, especially with regard to batch file payments, in the event that entire batches of payments are stopped to investigate a single mismatch or exception. These concerns are wide of the mark, since VoP involves pre-validating payee details at the Master Data level to ensure smooth transactions without unnecessary delay. What’s more, modern VoP implementations can verify multiple payments in a fraction of a second – a complete paradigm shift from time-consuming manual or semi-automated processes. Finally, the integration of VoP into exising bank payment processes thanks to a fully-customizable architecture means any disruption to processing speeds is minimal.

VoP: the bedrock of future payments

We are moving into an instant future, in which customers of all kinds are going to expect the same fast, secure, and smooth experiences from payments and banking found in other sectors such as healthcare and digital media. As this happens, it’s essential for banks to offer instant payments – and to make sure those payments are protected from fraud and directed to the right beneficiaries. VoP services deliver on both of these points. By building customer trust and confidence in banks, VoP will build loyalty and help to boost payment volumes and revenues, keeping banks competitive with alternatives including “X-pays” like Google Pay and Apple Pay, or payments offered by telecom operators.

For more than 30 years, Tietoevry Banking has been a leader in the design and implementation of financial software solutions for banks of all sizes across Europe, including VoP implementations. Most recently, we have been recognized as a registered provider of RVM services by the EPC, and announced a partnership with Movitz Payments that enables us to offer banks end-to-end verification of both payers and payees.

For a discussion about your bank’s approach to VoP, please contact Nicoline Lilletvedt.