The article first appeared on OMFIF on Dec 1th, 2024.

Cian OMurchu is Managing Director, Head of Strategic Transformation Office at Swift.

Global checks will drive progress towards instant and frictionless transactions

Cross-border payments are becoming faster and faster. No matter where they’re heading, their value or currency, transactions that arrive in a few minutes – or even seconds – are quickly becoming the new norm.

But as we edge closer towards an instant and frictionless future, it’s important to consider the other side of the coin. While customers undoubtedly want a cross-border experience that mirrors the speed of domestic payments, financial institutions should be aware of what higher payment speeds could mean for fraud risk. If payments arrive instantly, stopping them if a problem occurs becomes much harder.

Across Europe and beyond, many institutions are turning towards verification of payee as a means of overcoming this challenge. The European Commission’s Instant Payment Regulation has mandated that financial institutions offer a VoP check by October 2025, while other continents are in the process of developing their own systems too.

But what is VoP?

Put simply, it’s a means of pre-validating the accuracy of payee information before a transaction is sent. By confirming that the account name provided by the payer matches the details held by the recipient’s bank, institutions can help prevent funds from being sent to the wrong account due to errors or fraud. In addition to these benefits, pre-validating payments upfront is also far more efficient, preventing time-consuming investigations from occurring later in the process.

Implementing VoP on a global scale is not without its challenges. While many countries have already developed their own systems, standardisation of how a payment is verified is essential for it to function on a global level.

While some continents, like Europe, have mandated institutions to provide VoP checks, others have not, and it’s this lack of alignment that makes implementing cross-border VoP complicated.

Facilitating global interoperability

Across the globe, many countries have already implemented their own instant domestic payment systems to ensure that funds arrive on time and are kept safe from fraudsters. But for these systems to successfully work on an international level, interoperability between them is key.

Interoperability is the cornerstone of a truly global VoP service and, by enabling different systems to work seamlessly together, we not only enhance security and trust across borders, but also ensure a consistent user experience regardless of where a transaction originates. This connectivity is essential in building a resilient and inclusive financial ecosystem that serves everyone, everywhere.

As a globally inclusive co-operative made up of 11,500 financial institutions, Swift can facilitate the interoperability of domestic VoP systems, using its Payment Pre-validation solution as a foundation. This will provide global banks, including European banks needing to comply with incoming regulatory changes, with the ability to add to their offerings too. Those who adopt the service will be able to securely transfer and verify financial data, which is essential to the success of VoP around the world.