Payment verification rules are reshaping identity trust in open banking

At a glance

What this is: This is an analysis of how verification of payee, QWAC certificates, and PSD2 are changing payment trust and secure API communication in open banking.

Why it matters: It matters because payment systems depend on identity assurance between institutions, and IAM teams increasingly have to govern machine and organisational identities, not just human authentication.

By the numbers:

• Only 20% have formal processes for offboarding and revoking API keys, and even fewer have procedures for rotating them.
• 92% of organisations expose NHIs to third parties, raising concerns about supply chain security.

👉 Read GlobalSign's analysis of VoP, CoP, QWACs, and PSD2 payment security

Context

Payment verification is a control layer that checks whether a payment recipient matches the account details before money moves. In practical identity terms, it is a trust boundary between the payer, the payment service provider, and the receiving institution, which is why the article focuses on CoP, VoP, QWACs, and PSD2.

The governance gap is not only fraud prevention. As payments become API-driven and cross-border, institutions need strong machine-to-machine identity assurance, secure channel authentication, and consistent evidence that the recipient account is the intended one. That makes this topic relevant to NHI governance as well as payment security.

The article is typical of the current market shift: payment security is moving from isolated bank controls toward interoperable identity verification across ecosystems.

Key questions

Q: How should security teams govern payment verification in open banking flows?

A: They should treat payment verification as part of the identity control plane, not a back-office fraud add-on. That means recipient validation, API authentication, certificate management, and exception handling must be designed together so the payment path is trusted end to end. The control only works when each hop can prove who it is.

Q: Why do payment platforms need certificate-backed mutual authentication?

A: Payment platforms need certificate-backed mutual authentication because API traffic between banks, PSPs, and fintech providers must prove both endpoint identity and transport integrity. Without that assurance, recipient verification can be undermined by impersonation or interception before a transaction is authorised. QWACs and mTLS help preserve trust across the payment chain.

Q: What breaks when beneficiary verification is not linked to secure API communication?

A: The verification step becomes easy to trust on paper but weak in practice. If the communication path is not authenticated and encrypted, an attacker or rogue integration can alter beneficiary details, spoof a provider, or create false confidence in the result. Identity checks and channel security have to fail together or succeed together.

Q: Who is accountable for failed payment verification under PSD2 and related rules?

A: Accountability sits across the payment chain, including the PSPs, banks, and third-party providers that exchange and validate transaction data. PSD2 and the RTS for SCA and CSC require secure communication and authenticated endpoints, so failures are not just technical defects. They are governance failures in how the payment ecosystem is operated.

Technical breakdown

How CoP and VoP reduce payment misdirection

Confirmation of Payee and Verification of Payee both compare the beneficiary details supplied by the sender with the account identity held by the receiving institution. The control is designed to stop payments before settlement when the recipient name and account data do not align. CoP uses personal or business names with bank details, while VoP can rely on unique identifiers such as a legal entity identifier or tax code. The difference matters because modern payment ecosystems need entity-level assurance, not just account routing accuracy.

Practical implication: map the recipient-validation step into your payment workflows so mismatches trigger review before authorisation.

Why QWACs matter for API security in open banking

Qualified website authentication certificates provide strong authentication, encrypted transport, and integrity protection for traffic between financial institutions, payment service providers, and third-party providers. In PSD2 and open banking contexts, they support mutual authentication through mTLS and help prove that both ends of the API connection are genuine. That matters because payment verification loses value if the communication path itself can be impersonated or intercepted.

Practical implication: treat certificate-backed mutual authentication as part of the payment trust chain, not a standalone transport detail.

PSD2, RTS SCA and CSC as identity governance controls

PSD2 ties payment security to strong customer authentication and secure communication requirements, while the RTS for SCA and CSC define how those controls should operate in practice. The governance point is that payment identity cannot be verified reliably if the communication channel, endpoint identity, and transaction data integrity are managed separately. In other words, the payment flow is only as trustworthy as the weakest authenticated hop in the chain.

Practical implication: align your control ownership across authentication, API security, and transaction verification rather than treating them as separate programmes.

NHI Mgmt Group analysis

Payment verification is becoming an identity control, not just a fraud control. CoP and VoP exist because payment ecosystems need a reliable way to verify who the beneficiary really is before value moves. That shifts the problem from simple account validation to identity assurance across institutions, APIs, and legal entities. Practitioners should treat recipient verification as part of the broader identity trust model.

QWACs expose how payment security now depends on non-human identity governance. Banks, PSPs, and third-party providers are no longer securing only human logins. They are authenticating organisations and systems to one another, which makes certificate lifecycle, endpoint trust, and secure API communication part of the identity programme. The field should stop treating payment rails as purely financial infrastructure.

Verification of payee creates a control point where fraud prevention and trust assurance converge. The strongest value of VoP is not only reduced misdirection. It is the ability to create a consistent, auditable identity check before payment authorisation in a fragmented ecosystem. That is a useful model for any programme trying to govern machine-to-machine trust at scale.

Named concept: payment trust boundary. The article shows that modern payment security is no longer contained within a single bank or PSP. Identity verification now happens across institutions, certificates, APIs, and regulated communication standards. Practitioners should design governance around the trust boundary, not around one system boundary.

From our research:

• 92% of organisations expose NHIs to third parties, raising concerns about supply chain security, according to the Ultimate Guide to NHIs.
• 71% of NHIs are not rotated within recommended time frames, increasing the risk of compromise over time.
• The Ultimate Guide to NHIs also shows that 97% of NHIs carry excessive privileges, which broadens the attack surface when third-party integrations are in play.

What this signals

Payment trust boundary: as payment systems rely more heavily on API-based verification, the governance problem shifts from single-system authentication to cross-organisation trust. That means IAM, certificate management, and payment operations need a shared operating model rather than separate control silos.

The NHI governance lesson is straightforward. When institutions exchange credentials, certificates, and API calls to verify a beneficiary, the security posture is only as strong as the least controlled non-human identity in the chain. For teams formalising this model, the Ultimate Guide to NHIs remains a useful baseline.

The next step for practitioners is to align payment verification with broader zero trust thinking and the NIST SP 800-53 Rev 5 Security and Privacy Controls framework. NIST SP 800-53 Rev 5 Security and Privacy Controls remains relevant where authentication, auditability, and system integrity all meet at transaction time.

For practitioners

• Map recipient verification into payment approval flows Insert CoP or VoP checks before authorisation, and ensure mismatches create a clear exception path for manual review.
• Treat QWAC lifecycle as a governed control Track issuance, renewal, revocation, and ownership for certificates used in bank and PSP communications so trust does not outlive the relationship.
• Align API authentication with transaction validation Do not separate mTLS, endpoint authentication, and beneficiary verification into independent reviews. They are one trust chain and should be tested together.
• Review third-party payment integrations for identity assurance Verify that external providers using payment APIs are covered by the same secure communication and identity requirements as internal systems.

Key takeaways

• CoP, VoP, QWACs, and PSD2 are converging into a single identity trust model for payments rather than separate compliance checks.
• The main risk is not just misdirected money, but weak assurance across the certificate, API, and beneficiary verification chain.
• Practitioners should govern payment verification as an end-to-end trust boundary that includes non-human identity controls and secure communications.

Key terms

• Confirmation of Payee: A payment verification control that checks whether the beneficiary name matches the bank account details before a transfer is completed. It reduces misdirected and fraudulent payments by introducing a pre-authorisation identity check for account-based payments.
• Verification of Payee: A broader beneficiary verification process used across payment systems to confirm that the receiving account belongs to the intended recipient. In practice, it extends account validation to entity-level assurance and is often implemented through regulated payment rails and API integrations.
• QWAC: A qualified website authentication certificate used to prove the identity of organisations and secure communications between financial systems. It supports mutual authentication, encrypted transport, and integrity protection for regulated payment APIs and related service connections.
• Payment trust boundary: The point at which trust must be established across separate institutions, systems, and identities before a payment can safely proceed. In modern payment ecosystems, that boundary spans certificate management, API authentication, beneficiary validation, and regulated communication standards.

What's in the full article

GlobalSign's full blog covers the operational detail this post intentionally leaves for the source:

• Country-by-country implementation nuances for Verification of Payee and Confirmation of Payee
• How QWACs support mutual authentication and secure communication in PSD2-aligned flows
• The regulatory reading of RTS SCA and CSC requirements for payment providers
• Practical context on how payment verification is being adopted across regions

👉 GlobalSign's full post covers the regulatory context, QWAC role, and regional adoption of payment verification.

Deepen your knowledge

NHI governance, agentic AI identity, and machine identity security are core topics in our NHI Foundation Level course, the industry's only accredited NHI security programme. If you are building or maturing identity security strategy, it is worth exploring.