Chargebacks are a persistent challenge for all online businesses. Originally, they were designed to protect consumer rights, but their misuse often leads to what is known as “friendly fraud”. For merchants, high dispute rates can result in severe operational and financial consequences.
However, European financial regulations are evolving to address these issues. While security requirements for digital payments are becoming stricter – with harsher penalties for non-compliance – the new rules also provide merchants with better defence.
In this article, we show how recent and upcoming payment regulations will reshape chargeback policies and what these changes mean for business owners.
Payment service regulation (PSR): The single rulebook and liability shift
The Payment Services Regulation (PSR) introduces a unified standard for payment regulation across all EU member states, finally eliminating the fragmentation that had previously existed. As these rules take effect, dispute processes become more predictable for businesses.
The key takeaway – adhering to high security standards is the primary shield against friendly fraud. Under the PSR, if a merchant applies Strong Customer Authentication (SCA), the liability shift generally protects the business against claims of unauthorised payments. When a customer attempts to dispute a legitimate purchase, the strict security logs required by the PSR provide the core evidence needed to prove that the online transaction was actually authorised.
PSD3: collective anti-fraud defence
PSD3, expected to come into force between late 2027 and early 2028, sets new standards for communication between banks and online payment platforms. Together with PSR, these frameworks will accelerate the detection of suspicious patterns in online payments and the exchange of fraud intelligence between financial institutions. In simple terms, this allows systems to spot fraudulent transactions immediately and intercept them in real time. It also significantly strengthens defences against impersonation fraud, also known as spoofing.
The role of Verification of Payee (VoP) in reducing disputes
The rollout of Verification of Payee (VoP) as a part of Instant Payments Regulation (IPR) in 2025–2026 has significantly reduced disputes caused by mistaken transactions. VoP mandates that systems instantly verify the recipient’s name against their IBAN before the customer authorises the online payment, practically eliminating erroneous bank transfers. Once the user confirms the match, the argument of unintentional payment is significantly harder to claim.
These security measures are also a step towards the adoption of open banking in Europe. Previously, customers were often hesitant to use instant transfers because reversing errors was difficult. VoP effectively lowers this risk by ensuring funds reach the intended recipient. This not only serves as a barrier to fraudulent claims but also improves customer trust in open banking, helping it become Europe’s mainstream payment trend.
How online payment platforms help navigate new regulations
Keeping pace with new regulations and industry developments is not optional – it is a necessary step to protect and grow your business. In this era of digital payments, it can be done by partnering with payment platforms which prioritise security and integrate the latest standards into their infrastructure.
As new regulations create an even more favourable environment for open banking in Europe, businesses must seize this opportunity. One example of this technology’s use is the Pay by Bank payment method.
In Europe, this solution is actively popularised by Payop’s Pay by Bank. This payment method speeds up processing and ensures top-tier security.
When using Pay by Bank, customers are redirected to their banking app to authorise the transaction with their biometrics or a PIN. This safety mechanism verifies that the payment is made by the legitimate account holder, practically eliminating the primary reason for chargebacks.
At the same time, Pay by Bank is very convenient for users, allowing them to complete payments in just a few clicks. This combination of security and effortless user experience is actively transforming Pay by Bank from a mere alternative into a new industry standard. Adopting this method right now is the key to remaining competitive.
