European payment providers across 3,000 institutions prepare for mandatory verification systems to combat financial fraud
Key Takeaways
- 3,000 payment providers face October 2025 deadline as the European Payments Council mandates Verification of Payee services for all SEPA transactions, requiring significant IT infrastructure investment and compliance overhaul.
- Directory Service Providers have until July 18, 2025 to join the EPC’s collaborative effort to test routing algorithms for the new payment verification scheme, with Swift building the centralized EPC Directory Service platform.
- Two-tier onboarding system launched offering direct integration for larger institutions and simplified routing mechanisms for smaller payment service providers to manage compliance costs and technical complexity.
Introduction
The European Payments Council transforms payment security across the continent as it prepares to onboard 3,000 payment service providers to its new Verification of Payee scheme within two years. The EPC actively recruits Directory Service Providers to test critical routing algorithms that will underpin the mandatory verification system launching this October.
This initiative represents the largest coordinated effort to modernize European payment infrastructure in decades. Payment service providers must integrate name-matching services for SEPA transactions or face potential penalties and business disruption.
Key Developments
The EPC Directory Service emerges as the centerpiece of the verification system, functioning as a centralized database for participant information. Swift develops this platform to enable real-time verification checks between financial institutions across Europe.
Directory Service Providers managing BIC codes, national identifiers, and IBAN ranges receive invitations to contribute their expertise in testing IBAN-to-BIC mapping algorithms. The collaboration focuses on verifying the availability of Account Holding BICs needed for secure system configuration.
The pilot testing phase runs until August 2025, providing a compressed timeline for system integration and compliance verification. The EPC establishes API sandboxes and self-certification processes to support the complex technical requirements.
Market Impact
Payment service providers face substantial infrastructure investments as the October deadline approaches. The mandatory nature of the scheme creates immediate compliance pressure across the European financial sector.
Smaller payment providers gain access to simplified integration options through Routing and Verification Mechanisms, reducing initial investment requirements. Larger institutions pursue direct integration models for greater operational control despite higher implementation costs.
The compressed two-year rollout timeline creates operational challenges for the industry while accelerating digital transformation initiatives. Financial institutions must balance compliance costs against potential business disruption from non-participation.
Strategic Insights
The verification scheme establishes a new standard for payment security across Europe, shifting from fragmented bank-specific solutions to standardized pan-European platforms. This centralization improves interoperability while reducing fraud risks for consumers and businesses.
Swift’s role in developing the EPC Directory Service strengthens its position in European payment infrastructure. The company leverages its existing network relationships and technical expertise to support the continent-wide rollout.
The dual onboarding approach reflects practical recognition of varying institutional capabilities. Larger providers benefit from direct control while smaller entities access simplified compliance pathways, promoting broader market participation.
Expert Opinions and Data
Industry observers view the collaborative approach as essential for managing the scheme’s complexity and scale. The emphasis on real-time fraud prevention aligns with regulatory expectations and consumer demands for safer payment processing.
According to Finextra, the EPC issues a public call for interest to Directory Service Providers, seeking expertise in retrieving BICs from customer account numbers to support routing algorithm verification.
Technical experts highlight the operational burden of compliance, particularly for smaller payment service providers and new market entrants. However, they acknowledge that long-term benefits including reduced fraud and improved transaction trust will likely justify initial implementation costs.
The September 2025 launch date for the EPC Directory Service provides minimal buffer time before the October mandatory compliance deadline, creating additional pressure on participating institutions.
Conclusion
The European Payments Council’s Directory Service Provider recruitment marks a critical phase in European payment modernization. The initiative combines regulatory mandate with collaborative industry engagement to establish comprehensive verification infrastructure.
Success depends on effective coordination between technology providers, financial institutions, and regulatory bodies within an aggressive timeline. The verification scheme positions Europe at the forefront of payment security innovation while creating significant operational challenges for market participants.
