German Banks Block €10 Billion in PayPal Transactions Over Security Fears

September 2, 2025 • FinTech News
German Banks Block €10 Billion in PayPal Transactions Over Security Fears

PayPal is managing a major payments crisis in Germany. Last Monday, German banks temporarily blocked an estimated €10 billion worth of transactions. They acted over serious concerns about the security of PayPal’s system. Reports from Sueddeutsche Zeitung indicated that banks halted payments because they feared PayPal’s fraud prevention mechanism had stopped actively vetting transactions.

This disruption caused millions of consumers to struggle with online payments. The incident also sparked a fresh debate about Europe’s heavy reliance on American payment platforms like PayPal.

A Boost for Europe’s Homegrown Payment Alternative

The outage unexpectedly boosted the profile of a European rival, the European Payments Initiative (EPI), and its Wero wallet. This homegrown alternative is specifically designed to reduce the continent’s dependency on foreign fintech giants. The timing of the crisis was particularly notable. German banks had only recently abandoned their local PayPal competitor, Giropay/Paydirekt, to fully support the EPI’s pan-European solution.

PayPal’s Response and the Aftermath

PayPal confirmed the disruption in an emailed statement to Reuters. The company stated that it had resolved the issue and issued an apology. “Safety remains our top priority,” a spokesperson said. “We are working closely with our banking partners to resolve any discrepancies on customers’ accounts. All legitimate merchant transactions will be fully remunerated.”

While the immediate payment block is now lifted, the event raises broader questions. It highlights issues of trust and resilience within the European payments ecosystem. German consumers and merchants depend heavily on PayPal for online commerce. However, incidents like this will likely push regulators and banks to intensify their support for regional alternatives.

In the long term, this setback for PayPal could accelerate a strategic shift. It may drive faster adoption of the EPI’s Wero wallet, positioning it as a viable European challenger to the U.S. payments giant.