New IBAN name comparison: Pension payments are not affected

A change in bank transfers is causing confusion: When the EU Payment Directive comes into force in October, it could lead to pension payments being interrupted, according to a report circulating on social media. The German Pension Insurance Association (DV) emphasizes that this is false information. While there will be some changes for consumers, pension payments will not be affected.

Starting October 9, banks and savings banks must verify that the payee and IBAN match for individual transfers. A transfer could then fail if, for example, the recipient's name is misspelled. However, this risk does not exist for pension payments: companies and authorities can decide whether or not to use the new bank verification process for collective transfers. The pension insurance company does not. "Thus, starting October, pensions will be transferred as usual, even if there are minor discrepancies in the name," the pension insurance company stated.

However, something will change for consumers when they make a transfer themselves. For individual transfers, banks and savings banks will always be required to check whether the name and IBAN match. For joint accounts, a correct name is sufficient. The requirement to verify IBANs initially applies to eurozone countries, but will apply across the EU from July 9, 2027.

According to David Riechmann, financial expert at the North Rhine-Westphalia Consumer Advice Center, the reconciliation between the account holder's bank and the recipient's bank takes place in the background within seconds. "The customer only receives the result."

Three results are possible: name and IBAN match, name and IBAN almost match, or name and IBAN do not match. If there are minor discrepancies, such as umlauts or capitalization, the correct name is displayed to the sender, who can then select it. If the name and IBAN cannot be matched, the payer can decide whether to proceed with the transfer anyway.

However, consumer advocates advise against this: "If there is no match, consumers should check the transfer details and contact the payment recipient, such as the billing company," says Riechmann. While the transfer can still be authorized with an appropriate warning, one should be sure "that the money reaches the right person."

Until now, banks and savings banks were not required to reconcile accounts. This suited criminals who, for example, issued fake invoices for fictitious orders or services. In these cases, the payment recipient appeared legitimate and reputable to the sender, but the IBAN led to the fraudsters' account. Since the name played no role in the transfer process, the money was debited without warning. The victims were generally unable to retrieve the money.

The EU now wants to put a stop to this: "The legislator wants to prevent transfers to the wrong people, whether due to incorrect entries or fraud," a spokeswoman for the German banking industry said. Billers should therefore ensure that they provide clear information in the future.

However, thoroughness is also required from payers: Anyone who authorizes a transfer despite a mismatch bears the risk. According to the Consumer Protection Center, banks are only liable in cases of fraud "if the prior comparison has explicitly shown that the name and IBAN match."

Overall, the new regulation increases consumer safety, says Riechmann. However, the lawyer emphasizes that it's important that customers are aware of the changes when the system launches. "We see some catching up to do in this regard. Many have received the new terms and conditions, but don't know what to expect."