ARTICLE
The impacts of PSD3 on IBAN verification
3 August 2023
This June, the European Commission published its legislative proposal to amend and modernise the current version of the Payment Services Directive, PSD2. The new version, PSD3, introduces new guidelines regarding IBAN verification application and implementation.
In this article, we break down what IBAN verification is, what was previously in the law, and what PSD3 is changing.
Introducing IBAN verification
IBAN verification, also known as Confirmation of Payee in the UK, is the process by which a payer can confirm the name of a payee before sending a payment to a specific account number, or IBAN.
Concretely, let’s say that John Payer would like to send a payment to Jane Doe.
John Payer would enter Jane Doe’s IBAN into their bank’s mobile app. But it happened that Jane Doe incorrectly copy-pasted her IBAN before sharing it with John Payer. It’s actually Richard Roe’s IBAN.
“Jane Doe” doesn’t match “Richard Roe”, so John Payer’s bank mobile app would have to inform them that if they send a payment to this IBAN, they won’t send the payment to Jane Doe but Richard Roe.
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