In brief
German banks reported millions of suspicious direct debits from PayPal, leading to a blocking of approximately €10 billion in transactions. PayPal attributed the issue to a failure in its fraud-checking system, which allowed unauthorized payments to go through. The situation raised alarms across Europe, prompting an acknowledgment from PayPal regarding disruptions. Banks are now resuming normal payment transactions as investigations continue.
European banks have seen widespread unauthorized direct debits from PayPal accounts, according to the German Savings Banks Association (DSGV).
The German newspaper Sueddeutsche Zeitung reported that payments worth approximately 10 billion euros (£8.6bn) had to be blocked after PayPal's fraud-checking system failed.
Payments were paused on Monday when lenders reported millions of suspicious direct debits from the payment firm.
The DSGV confirmed to the BBC that there had been incidents involving unauthorized direct debits initiated by PayPal against various credit institutions.
The BBC has approached PayPal for comment.
It told Reuters that certain transactions from our banking partners and potentially their customers had been affected by a temporary service interruption.
We quickly identified the cause and are working closely with our banking partners to ensure that all accounts have been updated, a PayPal spokesperson stated.
The DSGV said PayPal had acknowledged the disruptions and assured that the problem has been resolved.
Payment transactions to and from PayPal have been running normally again, it noted.
These incidents had significant effects on payment transactions across Europe, particularly in Germany. The supervisory authorities have also been informed of the incidents.
PayPal aims to filter out scams before they can reach banks through a security system, particularly targeting fake direct debits set up by criminals.
According to SZ, PayPal's filtering system did not work properly on Monday, which allowed unchecked direct debits to be sent to banks alongside legitimate ones.
Shares in the payment firm fell by 1.9% on Wednesday following the report.
