How PSD3 and Instant Payment Regulations Impact Banks in 2025

How PSD3 and Instant Payment Regulations Impact Banks in 2025
Regulatory requirements 10 min read

The European banking landscape is undergoing a fundamental transformation with the introduction of PSD3 and the SEPA Instant Payment Regulation. These regulatory frameworks aim to enhance security, transparency, and efficiency in financial transactions across the EU and the DACH region (Germany, Austria, Switzerland). For banks, aligning with these evolving rules is not just a legal necessity but a strategic imperative—especially when it comes to fraud prevention and real-time payment readiness.

In this article, we explore how PSD3 and instant payment regulations are impacting financial institutions in 2025, focusing on key compliance challenges, technological requirements, and the growing role of Verification of Payee (VoP) solutions in mitigating fraud risks.

PSD3 and SEPA Instant Payment Regulation: Key Changes for 2025

Understanding PSD3

The Third Payment Services Directive (PSD3) and the accompanying Payment Services Regulation (PSR) represent the next step in the EU’s payment regulatory framework. Building on PSD2, the new legislation is designed to address security threats, market fragmentation, and growing consumer demands. Although not yet fully in force, the final version is expected by the end of 2025.

Key anticipated provisions include:

  • Enhanced Fraud Prevention: Requirements for stronger customer authentication and additional fraud controls.
  • Real-Time IBAN-Name Verification Encouraged: While not mandatory in PSD3 itself, the regulation calls for effective tools to prevent misdirected payments, which may include IBAN-name matching solutions like VoP.
  • Stronger Consumer Protections: Clearer rules for dispute resolution and complaint handling across the EU.
  • Harmonized Supervision: More consistent enforcement and oversight across member states through central authorities like EBA.

SEPA Instant Payment Regulation in the Eurozone

The SEPA Instant Credit Transfer (SCT Inst) Regulation, officially adopted in 2024, introduces binding obligations for all banks in the euro area:

  • Mandatory Instant Payments: By 9 October 2025, all PSPs in eurozone countries must offer SEPA Instant Payments. Other SEPA countries have until 9 July 2027.
  • 24/7/365 Processing: Instant payments must be processed in under 10 seconds, any time of day.
  • Fair and Transparent Pricing: Charges for instant payments must not exceed those for standard SEPA transfers.
  • Fraud Prevention Measures: Institutions must implement mechanisms to detect and prevent fraud in real time, including IBAN validation. VoP is widely seen as a best-practice solution to meet these needs.

Compliance Challenges for Banks in 2025

1. Strengthening Fraud Prevention Mechanisms

With the growing threat of Authorized Push Payment (APP) fraud, regulators are pressuring financial institutions to adopt stronger safeguards. Although not yet mandated EU-wide, Verification of Payee services are increasingly seen as a core component of an effective fraud prevention strategy—particularly in countries like the Netherlands, Germany, and Belgium, where national authorities are preparing VoP rollouts.

2. IBAN-Name Matching & VoP Implementation

While PSD3 does not impose VoP as a strict requirement, many EU countries are making it mandatory at the national level by integrating VoP into their instant payment infrastructure. For example, Germany and 19 other EU countries will require VoP solutions by October 2025, in line with the EPC’s (European Payments Council) scheme.

3. API Integration for Instant Payments

Banks must upgrade their core systems to support real-time processing. This includes secure APIs for payment initiation, VoP integration, and instant fraud checks, as outlined in SEPA rulebooks and national payment strategies.

4. Economic Impact of Payment Fraud in DACH

Increased fraud losses across the DACH region are driving both regulatory momentum and commercial demand for solutions like VoP. Payment misdirection, customer disputes, and reputational damage have made fraud prevention not only a compliance issue—but also a strategic differentiator.

How VoP Enhances Compliance and Security

Verification of Payee (VoP) solutions do more than help meet regulatory expectations—they also contribute to better user experience and business performance:

  • Reduce Payment Disputes: IBAN-name mismatch detection prevents misdirected transfers.
  • Improve Customer Trust: Clear, secure transaction flows reinforce confidence in the bank.
  • Boost Fraud Detection: Advanced VoP systems use machine learning to flag anomalies in real time.
  • Streamline Operations: Automated name-checking reduces costly manual investigations.

Why Acting Now is Critical

With SEPA Instant Payment compliance deadlines approaching in October 2025, and PSD3 finalization likely by late 2025, banks that delay implementation face:

  • Operational Risk: Inability to process instant payments will lead to lost clients and revenue.
  • Regulatory Penalties: Non-compliance may result in investigations and public warnings.
  • Increased Fraud Exposure: Weak security measures open the door to APP and social engineering attacks.
  • Competitive Disadvantage: Early adopters of VoP and instant payments will set new standards for user experience.

PSD3 and the SEPA Instant Payment Regulation are reshaping the European banking landscape. While the exact legal texts are still evolving, the direction is clear: real-time payments, proactive fraud detection, and customer protection are becoming non-negotiable.

By investing in Verification of Payee solutions and upgrading core payment infrastructure today, banks can ensure compliance, protect their reputation, and win customer loyalty in an increasingly competitive and regulated market.