Secure instant payments thanks to LEI: How the Legal Entity Identifier prevents fraud in instant payments

10 czerwca 2025

Fraud in instant payments is one of the biggest challenges facing modern financial systems. The introduction of the new Instant Payments Regulation (IPR) in the EU should not only increase the efficiency of cross-border payments but also ensure greater security. A key instrument in this development is the Legal Entity Identifier (LEI)- a globally unique identifier that brings transparency, trust, and efficiency to payment processes.

Why the LEI is indispensable for instant payments

The switch to instant payments promises enormous benefits for companies: faster cash flow, fewer processing risks and an immediate basis for decision-making. However, this speed also harbours risks. An incorrect or fraudulent transaction cannot be recalled. Robust payee verification is, therefore, essential.

This is where the LEI comes into play. As a standardised, international identifier, it enables precise and automated identification of payees, as specified in ISO 17442. The combination of IBAN and LEI numbers eliminates cases of doubt when assigning recipients, prevents errors due to similar names and effectively protects against manipulation.

The 'name check’ vulnerability – and how the LEI solves it

The new IPR requires banks and payment service providers to conduct recipient verification using the IBAN and name from October 2025. However, this so-called 'name check’ is prone to errors – spelling mistakes, similar company names and inconsistent data sources make automatic assignment difficult.

The solution: the LEI. It provides a unique, global reference that cannot be misinterpreted. Unlike the name, the LEI number is unique, can be digitally validated and cannot be manipulated. This significantly reduces the false positive rate and makes instant payments more secure – even across national and currency borders.

Benefits for companies through LEI registration

For corporate treasurers and financial managers, integrating the LEI into their payment processes is a decisive step. They benefit from

– Reduced susceptibility to fraud:

Comparing the IBAN with a verified LEI number prevents identity fraud.

– Greater automation:

No manual checks, no call-backs from suppliers.

– Regulatory security:

The LEI is internationally recognised and supports compliance with current and future financial regulations.

– Efficiency in bulk payment transactions:

entire payment batches are securely verified through targeted LEI registration of suppliers.

LEI registration: How companies can start now

The good news is that LEI registration is quick and easy to implement. Companies can apply for an LEI directly at lei.net. It is also crucial to motivate strategic partners and suppliers to register their own LEI, ensuring end-to-end security throughout the entire payment chain.

In addition, companies should prepare their ERP and treasury systems to process LEI data, enabling seamless straight-through processing and automated recipient verification.

Outlook: vLEI as the next evolutionary step

With the verifiable LEI (vLEI), the next innovation is already in the starting blocks. As a cryptographically secured extension of the classic LEI, it links legal entities with their authorised representatives—a decisive step towards even greater security in payment transactions.

Conclusion:

The future of instant payments is digital, fast—and only truly secure with reliable identity verification. Timely LEI registration not only protects against fraud but also gives companies a strategic advantage. Those who act today will benefit twice over tomorrow: through efficiency and trust in payment transactions.