In an increasingly digital world, payment security is more critical than ever. The Verification of Payee (VoP) mandate in Europe ensures the safety of financial transactions by verifying the beneficiary’s identity before making a payment. While this regulatory change primarily impacts Europe, it also has global implications, including Latin America. Given the growing importance of transaction security in the region, understanding how the implementation of VoP in Europe could influence Latin America’s financial ecosystem is crucial.
The Verification of Payee (VoP) is a regulatory requirement that improves payment security by ensuring the accuracy of therecipient's account information before processing a transfer. Introduced in Europe, VoP aims to foster trust and security in the adoption of digital payments by minimising the risk of fraudulent transactions. This mandate has had a significant impact, similar to the General Data Protection Regulation (GDPR) on data privacy, highlighting the potential global influence of such regulations.
In Latin America, the GDPR has already influenced how companies and organisations handle personal data, as many have operations or clients in the European Union and must comply with the data protection standards established by the GDPR. This has increased awareness about the importance of data privacy and has driven the adoption of stricter data protection measures in the region. Similarly, implementing VoP-like standards could elevate transaction security standards in Latin America, promoting trust and the adoption of secure digital payments.
Latin America has seen significant growth in banking and financial inclusion. For instance, a McKinsey study noted that in 2019, only about 30-50% of the population in several Latin American countries had a bank account, compared to over 90% in developed countries like Spain, the UK, and the US. However, by 2021, approximately 73% of people in Latin America and the Caribbean had a bank account, indicating strong growth and readiness for advanced financial security measures like VoP.
Accompanying this increase in financial inclusion, the region is also experiencing a notable shift towards non-cash payment methods. Between 2021 and 2023, preferences for methods such as debit cards, credit cards, and mobile payments more than doubled, while cash usage almost halved. This trend underscores the need for robust security frameworks, like VoP, to protect digital transactions and build consumer confidence.
To address these evolving financial trends, Latin America can look to international examples for guidance. In Europe, the VoP regulation requires Payment Service Providers (PSPs) to verify the payee’s identity before completing a payment. This regulation’s successful implementation has involved close collaboration between local PSPs and the adoption of advanced verification technologies. The experience in Europe offers valuable insights into the potential benefits and challenges of adopting similar measures in Latin America.
Countries worldwide are also adopting similar measures to enhance transaction security and prevent fraud:
Australia: in November 2023, Australia introduced the ‘Scam-Safe Accord,’ mandating name verification for payment transfers and developing a national Confirmation of Payee (CoP) system. These steps, along with increased investments in scam intelligence and account verification, aim to combat payment fraud.
UK: the UK has implemented the Confirmation of Payee (CoP) programme, which verifies the intended recipient’s identity through name and account matching, significantly reducing fraud in financial transactions.
These international examples, including VoP in Europe and CoP in Australia and the UK, demonstrate a growing trend toward stringent payment verification standards. They highlight the importance of protecting consumers and enhancing transaction security. Such measures can provide a roadmap for Latin American countries looking to adopt similar standards and strengthen their digital payment infrastructures.
The implementation of VoP-like regulations in Latin America presents both potential benefits and challenges:
However, challenges include potential regulatory changes and the need for innovative technologies to meet security demands. Effective implementation will require careful planning and collaboration among regulators, financial institutions, and technology providers.
The implementation of Verification of Payee (VoP) standards presents a significant opportunity for Latin America to boost payment security and align with global best practices. As the region experiences rapid growth in digital payments and financial inclusion, adopting robust security measures becomes critical to safeguarding transactions and building trust.
Prometeo is at the forefront of this transformative movement, providing state-of-the-art solutions like Account Verification, which enables companies to verify that the beneficiary’s banking account information is accurate and legitimate. This technology helps prevent incorrect or fraudulent payments, significantly reducing economic and reputational losses.
Currently, our Account Verification solution is available in six Latin American countries and the United States. This expansion allows more companies to enhance the security of their processes while complying with regional regulatory standards. By extending our services to the US and European markets, we are committed to delivering comprehensive and secure financial infrastructure solutions that support cross-border integration and compliance with international standards.
As Latin America continues to modernise its financial systems, leveraging VoP-like measures will be key to ensuring secure, efficient, and reliable digital transactions. For businesses looking to improve their payment security and operational efficiency, Prometeo offers the technology and expertise needed to navigate this evolving landscape.
About Ximena Aleman
Ximena Aleman is the co-CEO and Co-Founder of Prometeo, the fintech that provides a single banking API for cross-border banking. Through its single point of access to information and payments, Prometeo enables businesses to connect to more than 1200 financial institutions in 11 countries including the US, to verify information and receive or initiate account-to-account payments.
About Prometeo
Prometeo provides a single API for cross-border banking in Latin America and the US. We aim to empower companies with seamless and automated access to over 1500 connections across 1200 financial institutions in 11 countries.
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