In an era where digital payments have become integral to daily life, their security and accuracy is of utmost importance. There are still instances where individuals make errors when providing payment information. Or, even more concerning, fraudsters may have tampered with the invoice details, redirecting payments to a fraudulent payee account.
Until now, verifying the recipient's name and account number has been both the responsibility and the discretion of individual commercial banks, with the choice to either perform or omit this step. In Latvia, some commercial banks have already implemented this verification process for both intrabank transfers and instant payments.
On 5 October 2025, uniform regulations for verifying the payee and account number will be enforced across Europe. These regulations will establish mandatory rules and standards for the compulsory verification of both the payee and account number prior to initiating any payment (hereinafter the "payee verification"). This applies to intrabank payments, traditional payments to customers of other banks, instant payments, and also payments processed at commercial bank branches or ATMs.
It should be noted that this procedure does not affect the execution of the payment itself. The payer receives an informative alert notifying them of a discrepancy between the account number and the intended payee. The final decision lies with the payer – whether to proceed with confirming the payment for processing or to halt and cancel it entirely.
However, even when the alert is received, misunderstandings can arise and "false negative" notifications are possible. This can occur, for instance, when an institution's name is abbreviated (SRS for the State Revenue Service or LSRTC for Latvia State Radio and Television Centre) or when a partial name is provided ("Jānis Bērziņš" instead of "Jānis Pēteris Bērziņš"). Currently, a solution is under development, with thorough consideration given to how payment service providers (commercial banks, payment institutions, electronic money institutions, etc.) can address and manage such situations.
What is the payee verification?
The payee verification is a process that payment service providers must complete before authorising any payment. This involves verifying the alignment of the specified payee's bank account number (IBAN) with their name or other identifiers, such as a VAT number or legal entity identifier. The payee verification is conducted prior to every payment, even if it is the 10th transaction to the same payee, or when repeating the payment as a standard credit transfer after an instant payment is rejected for any reason.
The purpose of the payee verification is to ensure that the payer has information about the verification result before authorising the payment, in order to minimise the risk of fraud and reduce the likelihood of errors.
The payee verification is designed to be swift and efficient. Before the payer starts the payment, their payment service provider promptly sends a verification request to the payee's service provider. Subsequently, the payee's payment service provider cross-references the provided information with its records and responds with a "match", "mismatch", or "close match" status. The entire process is designed to be completed in no more than five seconds. It should be reiterated that the verification result does not affect the payer's right to proceed with the payment using the original payee information provided. It remains the payer's own responsibility.
The primary advantages of the payee verification are:
- Enhanced security. Verifying the payee's details before processing a payment mitigates the risk of fraud. This is particularly crucial in combating payment fraud, where fraudsters deceive individuals by tampering with invoice details to redirect funds to a different payee's account.
- Enhanced accuracy. The payee verification helps ensure that payments are directed to the correct payee, minimising the risk of errors and reducing the need for costly, time-consuming payment reversals.
- Consumer confidence. Awareness that the payee verification is performed may boost consumer confidence in digital payments, motivating a broader adoption of online and mobile banking services.
Although the payee verification offers substantial advantages, its implementation presents challenges for payment service providers. The implementation of the service entails considerable technical solutions, including the need for standardised communication between all payment service providers throughout Europe, as well as the integration of the payee verification across all payment initiation channels.
Latvijas Banka will ensure the verification of the payee's name/company name against the specified payee's account number (IBAN). Moreover, beginning in October 2025, it will provide interested payment service providers from other European countries with access to its instant verification service.
The payee verification represents a crucial advancement in payment security. This will enable payment service providers to offer their customers – individuals, businesses, and organisations – a service that verifies the alignment between the payee's first name, last name, company name, or, where applicable, the alignment of the identifier with the IBAN before authorising the payment. This is an additional security feature designed to reduce the risks of fraud and human error in payment processing. As of October 2025, the Instant Payments Regulation will mandate that payment service providers offer this service prior to authorising any SEPA payment. However, their customers will retain full discretion in deciding whether or not to proceed with the transaction.