The European Commission on 23 July 2024 published  (IPR). In this , we asked industry experts in Luxembourg about their key takeaways from the list of Q&As. Here’s what Anne-Sophie Morvan, chief commercial officer at Luxhub, highlighted for us.

Large value payment systems (LVPS)

“One question that was agitating the banking scene over the last months was related to the applicability of the Instant Payments Regulation, or not, to transactions processed and settled via large value payment systems or LVPS (such as T2),” said Morvan. “The answer to this question was particularly important for some banks, which are solely processing credit transfers through these channels and, for several of them in Luxembourg, with very limited volume of payments (but large amounts).”

“The Directorate-General for Financial Stability, Financial Services and Capital Markets Union (DG Fisma) clarified in answer n°3 that ‘PSPs that provide their PSUs with (non-instant) credit transfers, as defined in Article (2), point (1), of the SEPAR, but process and settle all of such non-instant transfers only via LVPS do not have to provide their PSUs with a payment service of sending and receiving instant credit transfers in euro since the non-instant credit transfers’ transactions processed and settled via a LVPS are excluded from the scope of the SEPAR.’”

“In line with this analysis performed with respect to the reception and initiation of credit transfers, DG Fisma further clarified in answer n°111 that there is no obligation to implement verification of payee in relation to credit transfers processed and settled through LVPS.”

Verification of payee may nevertheless be implemented by PSPs on a voluntary basis in order to reduce the risk of payment fraud

Anne-Sophie Morvan, chief commercial officer, Luxhub

“As pointed out several times by DG Fisma in its clarifications, verification of payee may nevertheless be implemented by PSPs on a voluntary basis in order to reduce the risk of payment fraud, which is particularly relevant in the light of the large amounts of transactions processed.”

“The two above clarifications are without prejudice to the obligation for entities performing both LVPS transactions and SEPA transactions, to comply with the IPR for the latter type of transactions,” added Morvan. “It is interesting to note that PSPs processing payments through LVPS might nevertheless need to implement verification of payee service in a near future in the context of the forthcoming Payment Services Regulation (PSR), which is currently still in the legislative process at the European level.”

Verification of payee (VOP)

“As from 9 October 2025, payment service providers performing SEPA payments will have to offer their payers a service ensuring verification of the payee to whom this payer intends to send a credit transfer,” explained Morvan. “Over the last months, several institutions argued that internally processed payments, credit transfers which can solely be performed from and to accounts held by the accountholder itself as well as payments processed for the benefit of authorised beneficiaries could / should fall out of the scope of the VOP obligation since they might seem to present less risks at first sight. DG Fisma nevertheless confirmed in answers n°92, n°93 and n°133 that payers shall benefit from the service ensuring verification for ‘on-us’ and ‘me-to-me’ transfers, as well as in the case of transfers initiated to authorised beneficiaries.”

Bulk payments

“Furthermore, bulk payments raise a lot of questions as the number of checks per file to be performed might often average tens of thousands or even much more, for instance when it comes to the payment of civil servants’ salaries. Professionals may decide to opt out from the verification of payee but at any moment they should have the possibility to opt in again. Several questions were therefore raised in this respect in order to find practical solutions to this challenge.”

“One in particular caught our attention as it provides interesting implementation solutions,” noted Morvan. “DG Fisma confirmed two suggested scenarios in the event of pre-authorised bulk payment orders (answer n° 120).”

“Scenario n°1 would be the following: 1) First, a pure VOP requests file shall be sent by the payer to its PSP before sending the real bulk payment orders; 2) VOP response is sent back to the payer immediately after the provision by the payer of the information about the payee; 3) Then it is up to the payer to prepare the bulk payment orders according to the VOP responses. A specific opt-out would not be needed, as the payer would authorise the payment orders included in the file, based on the received VOP feedback, when sending the file for unpacking and processing by the payer’s PSP.”

“Under scenario n°2, the payer’s PSP could offer to perform the VOP from the bulk payment orders itself, then executes the payment orders which the VOP response is a ‘match’ based on a contractual arrangement between the PSP and the payer and requests the confirmation of the payer in case of ‘almost match’ and ‘no match.’”

“Both scenarios would enable--in a certain way--to limit downgrading the user experience. Likewise, inviting professionals using bulk payments to check their payees’ databases on a regular basis based on an ‘ad-hoc’ verification of payee service (answers n°117 and n°119) would minimise friction in the PSU’s payment journey,” said Morvan. “All these elements are key for PSPs when assessing the impact of VOP obligation and should be carefully taken into consideration sufficiently in advance in order to ensure that VOP does not impact negatively the user experience.”

Specificities for PIs and EMIs (and their banks)

“In the light of the large number of questions raised in relation to the implementation of VOP by payment institutions (PIs) and e-money institutions (EMIs), it is obvious that some specific challenges will be encountered by those institutions,” argued Morvan. “Three main issues have been raised.”

“First, those institutions often hold an account at a bank on behalf of multiple payees (omnibus account). The IBAN belongs to the PI / EMI but the actual payee is the PI’s / EMI’s client. One may therefore wonder who shall be the PSP that needs to provide the result of the matching service.”

“In answer n°108 (confirmed in answer n°110), DG Fisma clarified that it is up to ‘the PI/EMI and the credit institution to agree between themselves which one of them will provide the feedback (on the outcome of payee verification) to the payer’s PSP. In practice, this would/could be influenced by the type of arrangement between the PI/EMI and the credit institution.’”

“Then, questions were raised with respect to the identification of a given payee in the context of accounts held / maintained on behalf of multiple payees (e.g. omnibus accounts). The IPR states that the payer may provide additional information allowing the payee to be unambiguously identified but does not list the type of additional information. DG Fisma clarified in answer n°125 that this could for instance include primary account numbers, sub-account identifiers on the ledger of an EMI or PI. In such a case, however, the PSP shall on this basis determine whether or not the payee is among the payees on whose behalf the payment account is held but it is not required to provide the end payee information (answer n° 127).”

“Finally, queries were raised in relation to proxies, for instance where payments initiated based on the payee’s telephone number. In such a case, DG Fisma leaves room to PSPs to define the practical steps depending on specific payment initiation channel provided that the payer can be provided with the service ensuring verification. In order to fulfil their duties, PSPs need to make sure that the users of the solution are accurately onboarded, allowing to link the payee’s phone number and IBAN (answers n°129, 130 and 131).”