Funds Confirmation

Funds confirmation is a service in which a bank, at the request of an authorised third party and with the customer's consent, answers whether a particular amount is available in the customer's payment account. The answer is a simple "yes" or "no": the bank does not reveal the balance, and it does not block the funds. The service lets a third party, such as a card issuer that is not the customer's bank, decide whether a payment can be completed without first holding the customer's money itself.

The service was created by the European Union's PSD2 as one of the access rights for third-party providers, alongside account information and payment initiation. It is provided through the bank's dedicated interface or open banking API. In the UK, the equivalent is known as Confirmation of Funds, part of the open banking standards.

Article 65 of PSD2 requires an account servicing payment service provider to confirm immediately, on request, whether an amount needed for a card-based payment transaction is available on the payer's account, when the request comes from a payment service provider that issues card-based payment instruments. Conditions include:

• The account must be accessible online when the request is made.
• The payer must have given explicit consent to the bank for such requests from the specific provider.
• The request must be made by the provider for a specific payment initiated by the payer with the card-based instrument.
• The provider must authenticate itself to the bank and communicate securely.
• The answer is limited to yes or no, the bank may not block funds as a result, and the provider may not store the answer or use it for other purposes.

The provider making the request is sometimes called a card-based payment instrument issuer (CBPII). The detailed technical rules sit in the regulatory technical standards on strong customer authentication and common and secure communication.

1. A customer obtains a payment card or other card-based instrument from a provider that is not their bank, linked to their existing current account.
2. The customer gives consent, through the bank, for that provider to make funds confirmation requests.
3. When the customer makes a purchase with the card, the provider sends a request to the bank's API asking whether the amount is available.
4. The bank replies yes or no in real time.
5. If yes, the provider approves the purchase and later collects the funds from the customer's account, for example by a direct debit or a payment initiation.

The service was designed to support competition in card issuing, allowing a non-bank to issue a debit-like card linked to a customer's existing bank account. It can also be used in other contexts where a provider wants to reduce the risk that a later collection from the account fails, such as before initiating payment for a large purchase. Some banks and fintechs have explored funds confirmation for checkout flows that combine card-like experiences with account-to-account settlement, and for verifying affordability in real time. Unlike an authorization hold on a card, funds confirmation does not reserve money, so the balance can change between the check and the actual payment.

Take-up of funds confirmation has been limited compared with account information and payment initiation services. Reasons include the narrow legal scope, which ties the service to card-based instruments; the need for separate consent at the bank; the fact that funds are not reserved, so there is still a risk the later collection fails; and the availability of alternatives, such as account information access, that give more data. Some third parties also find it simpler to use instant payment initiation, which moves money immediately and removes the need for a separate check.

Funds confirmation is distinct from a balance check, which reveals the balance, and from Confirmation of Payee, which checks that a payee's name matches an account. It complements the account information API and the payment initiation API, which together make up the core open banking services under PSD2. Proposals for a new EU Payment Services Regulation keep the funds confirmation right while seeking to improve how open banking interfaces perform in general.

• European Banking Authority
• Open Banking Limited