European Banks Hit by Massive Unauthorised PayPal Debits After Security Failure

European lenders have been forced to block billions in suspicious transactions after PayPal’s fraud detection system failed, according to the German Savings Banks Association (DSGV).

German daily Sueddeutsche Zeitung reported that payments worth roughly €10 billion (£8.6bn) had to be stopped after millions of questionable direct debits originating from PayPal accounts slipped through the company’s checks. The problem came to light on Monday when banks flagged the unusual volume of fraudulent activity.

The DSGV confirmed to the BBC that there had been “incidents involving unauthorized direct debits initiated by PayPal against various credit institutions.”

Approached for comment, PayPal acknowledged the issue. Speaking to Reuters, the company said that “certain transactions from our banking partners and potentially their customers” had been caught up in a temporary disruption of service.

“We quickly identified the cause and are working closely with our banking partners to ensure that all accounts have been updated,” a PayPal spokesperson said.

The DSGV added that PayPal had “acknowledged the disruptions” and “assured” the association that the problem had been resolved. “Payment transactions to and from PayPal have been running normally again,” it said.

“These incidents had significant effects on payment transactions across Europe, particularly in Germany,” the DSGV continued, noting that supervisory authorities have also been informed.

PayPal’s systems are designed to intercept scams before they reach banks, especially fraudulent direct debits set up by criminals. Such scams often rely on deceiving victims into handing over personal details, frequently by impersonating banks or financial institutions over the phone.

According to Sueddeutsche Zeitung, the company’s filtering mechanism failed on Monday, allowing illegitimate direct debits to pass through alongside genuine ones.

Shares in PayPal dropped 1.9% on Wednesday following publication of the report.

By fLEXI tEAM