E-commerce businesses are apps and websites that sell services or goods online. Those platforms - who now arrange the payment services themselves and therefore deal with money from third parties - will soon need to have a permit for this. This permit requirement can have major organizational and financial consequences.
Also read: PSD2 - All your questions answered
No groundwork for exception
Up to now, such payment activities were subject to an exception to the license obligation for payment service providers. The new European legislation for payment service providers, the PSD2, will introduce further harmonization to the regulations as from 13 January 2018. From that moment on, there will no longer be an exception to the permit requirement for e-commerce businesses that provide their own payment services.
The new regulations forces these platforms to make a choice:
- Become an official payment institution
- Change to Merchant or Record
- Outsource the service to a payment institution
Becoming a payment institution doesn’t come easy
Option 1 is the most time-consuming and expensive option. Becoming an official payment institution doesn’t come easy. The route to the permit is long and uncertain and requires a high-quality organization that can prove that it is dealing with money professionally.
If a trading platform opts for option 2, it becomes fully liable for outstanding credits. The e-commerce business becomes responsible for every financial contract with the merchants and buyers, with different currencies. This is also a time-consuming job.
Worry less by outsourcing
Option 3 is the easiest solution. The e-commerce business outsources payments to a Payment Services Provider (PSP or payment institution) such as CM.com. An official payment institution offers a so-called 'full service managed transaction services' model in which e-commerce businesses can be completely unburdened.
For the e-commerce platform, this means "Business as Usual". It doesn’t need resources for things like PSD2 Compliance, Anti-Money Laundering (AML) and Customer Due Diligence (KYC). In combination with access to all payment methods and currencies, an investment in a strong business relationship with a payment institution is worth the effort.
Do you want to know more about PSD2 and trading platforms? Contact Richard van Anholt, Market Manager Financial Services at CM.com.