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PSD2, marketplaces and the future of payments – Acapture

Acapture, Payvision’s subsidiary company, recently authored a whitepaper examining the potential impacts of the new PSD2 regulations on the payments ecosystem, particularly within the context of the online marketplace, which is set to encompass 39% of the entire online retail market by 2020. The whitepaper begins by looking at the PSD2; its key regulations and updates made to key exemptions, before exploring possible steps that online marketplaces can take to cope with changing tides.

‘The Biggest Change ever in banking’

In essence, the whitepaper posits that the PSD 2 is a forward-looking piece of legislature that is designed to ensure rapid digital payment innovations are not made at the expense of the consumer’s security or the market’s competitive edge. It places an increasing amount of scrutiny on any operator that, at any stage in a transaction, is handling another party’s money. In practice, this means stricter security requirements for electronic payments and the handling of consumer data, a more open market for companies offering innovative, business oriented payment services, enhanced consumer rights regarding refunds and liability, and less leeway and more transparency regarding the charging of additional fees on certain types of payments. Within the context of online marketplaces, the PSD2  aims to protect smaller companies, who primarily drive innovation in the online shopping space; and consumers, who will benefit from a more secure shopping process.

Filling the loophole

PSDs’2 predecessor, the PSD1, exempted authorized commercial agents that Payment transactions made via commercial agents permitted to negotiate or conclude the sale or purchase of goods or services that handled payment transactions on behalf of both payer and payee. The PSD2 renegades on this provision by restricting exemption eligibility to commercial agents who represent the either payer or the payee, not both. This effectively means that all online marketplaces will need to be licensed as payment institutions and be subject to all the financial, regulatory and operational necessities that follow.

Next steps

In light of the PSD2 and its repercussions, the authors outline two possible options that online marketplaces can choose. Firstly, online marketplaces can opt to apply for a payment institution license; although doing so entails significant costs and compliance requirements. Alternatively, online marketplaces can work with existing licensed payment institutions by outsourcing a portion of their funds. License payment institutions need to be PSD2 compliant to operate, which means that the online marketplaces in question do not have to make systematic changes to meet regulatory requirements. All in all, the authors emphasize on the need for online marketplaces to act quickly to ensure that the regulatory burden of PSD2 does not become a significant roadblock.

To download the report, click here.

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