“IBAN check will not be enough to prevent bank fraud related to instant payments”, said Dr Joachim Schmalzl, member of the Executive Board of the German Savings Banks Association (DSGV), at a conference organised on Tuesday 28 February by the European Savings and Retail Banking Group (ESGB).
Dr Schmalzl welcomes the European Commission’s legislative proposal of October 2022 for the widespread deployment of instant euro payments (see EUROPE 13051/16).
“There is little innovation in payments, it is an asset that makes us more competitive in Europe, but it is underused”, he said. In his view, this type of payment will become normal in the future.
He considered that the market “needs a push” to implement it. “This is necessary because market acceptance is too slow, and I agree with the Commission on that”, he added.
However, he regretted that the Commission’s proposal did not contain more measures to combat fraud. “IBAN check is a high risk for instant payment”, he warned. “There is always a question of fraud when it comes to payments, but it is even more dangerous when payments are instantaneous”, he continued.
The ‘IBAN-name check’ consists of a bank checking whether the account number (IBAN) and the name of the beneficiary match in a transfer order. If this is not the case, the bank will inform the customer, who can then confirm or cancel the transfer order. This system already exists in the Netherlands.
“This is not a bad idea, but it’s the only answer the Commission has”, said Dr Schmalzl.
He pointed out that 80% of fraud cases are the result of ‘social engineering’, i.e. psychological hacking or psychological fraud. According to him, even the European criminal police agency Europol is not really in favour.
The solution lies more in the transparency of the anti-fraud systems set up by the banks and in prevention among consumers, according to Dr Schmalzl.
The German also criticised the content of the revision of the ‘PSD 2’ Directive governing payment services, presented by the Commission in February (see EUROPE 13116/14) and which includes the proposal on instant payments. In particular, this revision allows for the sharing of payment account data with another provider, with the customer’s consent.
He believes that this regulation is “not balanced”, as payment apps like Apple Pay use data provided by banks for free, while banks pay for the system to work. “We need to organise a European answer by helping to form a consortium in the EU to work together”, he said. (Original version in French by Anne Damiani)