German banks have blocked PayPal transactions totalling more than €10bn over concerns of fraudulent activity, reported German daily Sueddeutsche Zeitung.
The report indicated that a multitude of direct debits processed by PayPal raised red flags for potential fraud last week.
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The direct debit process, which allows PayPal to withdraw funds from a customer’s bank account upon online purchases, seemed to have been compromised.
Normally, PayPal’s security mechanisms screen for fraudulent attempts, but it appears that these systems did not function correctly at the end of the previous week, resulting in unchecked direct debits being sent to the banks.
Several banks, including Bayerische Landesbank, Hessische Landesbank, and DZ-Bank, responsible for transactions from cooperative banks, detected the issue through their security systems and decided to temporarily stop all PayPal transactions.
This preventive measure aims to avert the risk of unauthorised withdrawals from customers’ accounts.
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By GlobalDataThe interruption in the payment process has led to a situation where retailers have not received payments for goods, while the funds have not left the customers’ accounts.
The duration of delivery delays for goods, if any, is currently uncertain.
The time it will take to rectify the situation is dependent on the number of transactions the banks will need to process manually, with expectations of a resolution spanning several days.
The report suggests that Bayerische Landesbank alone has withheld around €4bn.
The release of these funds is contingent upon the verification process to separate valid transactions from those that are fraudulent.
The savings banks have reported that their customers were also briefly impacted by these events.
They have notified the supervisory authorities about the PayPal incidents.
Most other banks have deferred to a collective statement from the German Banking Industry Committee, which acknowledged the discovery of “irregularities in payment transactions with PayPal” on Monday morning and stated that measures were being taken on an individual basis.
A spokesperson from PayPal was quoted by the newspaper as saying: “Paypal experienced a temporary service disruption that impacted certain transactions for our banking partners and potentially their customers. We quickly identified the cause and are working closely with our banking partners to ensure all accounts are updated.”
A notice on PayPal’s help page said: “We experienced a temporary service disruption over the weekend, resulting in transactions being delayed for a small number of accounts. The issue has since been resolved.”
Last month, PayPal introduced a feature for US merchants to accept over 100 types of cryptocurrencies.
