- European banks freeze PayPal transactions after fraud system failure sparks disruption
- Merchants face delayed payments as billions in PayPal direct debits halted
- Suspicious surge forces lenders to suspend PayPal activity across Germany and Europe
European banks temporarily froze PayPal transactions worth billions after fraud system failure triggered widespread suspension of direct debits and delayed payments for online merchants and customers.
A number of German lenders, including Bayerische Landesbank, Hessische Landesbank and DZ-Bank, reportedly halted direct debits linked to the online payment platform after detecting suspicious activity.
German newspaper Süddeutsche Zeitung said the total amount involved could exceed €10 billion.
“Temporary service interruption”
The issue appears to have started late last week when PayPal submitted a wave of direct debits to banks without filtering them through its fraud checks.
That led to an unusual surge in transactions that looked suspicious or potentially fraudulent.
The banks’ own systems flagged the irregularities and many decided to freeze all PayPal activity for a period.
A spokesperson for PayPal confirmed the disruption, saying, “PayPal had a temporary service interruption that impacted certain transactions from our banking partners and possibly their customers. We quickly identified the cause and are working closely with our banking partners to ensure all accounts have been updated.”
On PayPal’s help page, a bright red banner currently says: “Over the weekend, we experienced a temporary service interruption that resulted in transactions being delayed for a small number of accounts. The issue has since been resolved.”
The German Banking Industry Committee noted that irregularities were observed on Monday and that individual institutions responded accordingly.
For merchants, the freeze meant payments did not arrive on time, even though customers still held onto their money. Insiders told SZ that reconciling the affected transactions could take days.
The scale of the disruption and the temporary freeze of payments underlines the risks of failures in systems that process such a large share of online commerce.
The new problem comes shortly after PayPal was linked to the appearance of millions of stolen account details on the dark web. That case was tied to past breaches rather than a fresh attack, but it still raises questions about the safety of online accounts.
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waynewilliams@onmail.com (Wayne Williams)
