PayPal’s fraud detection system suffered a major failure last week, causing European banks—particularly in Germany—to freeze over €10 billion (around $11.7 billion) in transactions. The malfunction allowed unvetted direct debits to trigger automated fraud defenses, disrupting payments across multiple institutions, including Bayerische Landesbank, Hessische Landesbank, and DZ-Bank.
PayPal confirmed the incident was a temporary service interruption, stating that it quickly identified and resolved the issue, and pledged to work with banking partners to reconcile affected accounts. Services largely resumed by midweek, but the fallout highlighted vulnerabilities in cross-border digital payment infrastructure.
The glitch hammered investor confidence, with PayPal shares sliding 1.9% in pre-market trading amid concerns over compliance reliability. Meanwhile, regulators like Germany’s BaFin and Luxembourg’s CSSF confirmed they were informed but have not mandated any immediate intervention.
Though PayPal called the disruption resolved, some users and merchants (particularly online retailers) reported delayed payments and transactional confusion that could linger for days. This incident underscores the critical importance of robust fraud management systems in fintech.
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