German banks temporarily halted PayPal (PYPL.O) transactions worth more than €10 billion ($11.7 billion) this week after detecting abnormally high volumes of suspicious direct debits, according to a Sueddeutsche Zeitung article on Wednesday.
The halt occurred on Monday when lenders discovered millions of suspicious payments related to the US digital payments business, according to the newspaper.
At the time of writing on Wednesday, the PayPal stock is down around 1%. The broader market is trading flat ahead of Nvidia’s earnings scheduled for later today.
PayPal confirms service interruption
PayPal recognised the situation, admitting that a temporary service disruption had impacted “certain transactions from our banking partners and potentially their customers.”
The company stated that the issue has since been rectified.
“We quickly identified the cause and are working closely with our banking partners to ensure that all accounts have been updated,” a payment platform spokeswoman stated.
According to a banking source, the blocked transfers ranged in value from hundreds of millions to billions of euros, suggesting doubt over the exact scope of the disruption, Reuters reported.
Security filters reportedly failed
PayPal’s fraud detection systems, which are designed to identify suspicious activity and filter out false positives before initiating bank transactions, were either fully or largely disabled late last week, according to the newspaper.
As a result, banks began receiving direct debit mandates that had bypassed PayPal’s usual security checks.
The lapse marked a rare breakdown in the company’s safeguards, allowing fraudulent activity to reach banks and triggering significant disruption.
Impact on German savings banks
Germany’s Savings Banks and Giro Association, which represents more than 300 local savings banks and financial service providers, said on Wednesday that unauthorised direct debits from PayPal had caused a “significant impact on payment transactions” across Europe, with Germany particularly affected.
The association noted that PayPal transactions for Sparkasse bank customers had returned to normal by early Tuesday.
It also confirmed that supervisory authorities had been notified of the incidents.
As per the report, Germany’s financial regulator BaFin said it had been informed but declined to provide further details.
Luxembourg regulatory monitoring
The CSSF regulator in Luxembourg, where PayPal Europe is headquartered, reported no severe interruptions that required assistance.
The government declined to comment on PayPal directly, but did indicate that operations were stable at the time of the announcement.
The regulatory replies highlight the cross-border character of payment system supervision, particularly for large providers such as PayPal, which function as a hub for millions of consumer and commercial transactions across Europe.
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