German banks temporarily halted more than EUR10 billion in PayPal-linked payments after detecting a surge of suspicious direct debit transactions, according to German Newspaper Süddeutsche Zeitung.
The disruption began on Monday, 25 August when lenders flagged unusual payment activity tied to PayPal accounts. Banks decided to block transactions pre-emptively amid concerns of fraud.
A PayPal spokesperson said the company had experienced “a temporary service interruption that affected certain transactions from our banking partners and potentially their customers. We quickly identified the cause and are working closely with our banking partners to ensure that all accounts have been updated,” according to Reuters.
An anonymous banking source estimated that the halted transactions ranged “from hundreds of millions to billions of euros,” according to the same report.
The Germany’s Savings Banks and Giro Association, representing more than 300 regional lenders, said the issue had a “significant impact on payment transactions” across Europe, particularly in Germany. Most Sparkasse services had returned to normal by Tuesday, 26 August, according to the association.
Germany’s financial regulator BaFin confirmed it had been informed of the disruption but declined further comment, according to Reuters. The Luxembourg-based CSSF, which oversees PayPal Europe, said there were no ongoing problems requiring intervention.
On Friday, 29 August, PayPal confirmed it was working with German banks to resolve the fallout from the incident, which affected approximately EUR 10 billion in payments, according to Reuters. “We apologise for the inconvenience caused by the current events. Safety remains our top priority,” the company said in an emailed statement. PayPal added that “all legitimate merchant transactions will be fully remunerated” and confirmed the disruption had been resolved, according to Reuters.
Some customers, however, continued to report delays even after PayPal announced the fix.
Shares in PayPal fell between 1.9% and 2.5% in early trading following the reports. The incident has drawn attention to the risks of technical failures in financial technology systems and the knock-on effects for banks, merchants and customers. Regulators in Europe are now expected to scrutinise the incident more closely, according to analysts cited in the Reuters report.
