Beating payments fraud in 2020
In our previous PSD2 article, we explored the essentials of PSD2 and the key changes that may impact your business. To continue our PSD2 blog series, this time we’re exploring the impact of the new European regulations on platforms.
Platforms dominate the world of commerce. They’ve disrupted the retail, food and transport industries. And they’ve become the driving force for the sharing economy. Growth for these platforms is essential. But there are many barriers in the way. As you expand into new markets you have to deal with different regulations and stakeholders (consumers and users).
In Europe of course, you have PSD2. This was designed to create more security and a better payment experience for customers. If you’re operating in the EU you’ll need to commit time and resources to prepare for the regulatory changes. So focusing on growth and business optimization becomes difficult.
Most platforms collect payments on behalf of their users before settlement takes place. From January 2018 this activity is regulated in the EU. And so a platform which is at any time in possession and/or control of clients’ funds will need a license to operate. If you want to avoid the payment service provider (PSP) license requirements, you’ll need to structure your payment flow in a compliant way.
You essentially have two choices in order to comply with the new regulations …
1. Apply for a PSP license and be regulated directly, which is very rare.
2. Use a licensed PSP and allow them to keep control over the funds being paid out to your users.
Bear in mind that the first option is expensive and extremely time-consuming. It can take months to put all policies in place. And the costs of the application process can add up to the hundreds of thousands. Even with all the time and money spent, the application is still not guaranteed to be approved. The easiest, and most cost-effective way for a platform to deal with PSD2 is to find a licensed PSP, such as Adyen.
A licensed PSP gives you an easier transition into the new PSD2 payment landscape. It does this by ensuring the sellers’ funds are segregated from the platform funds. Which means you’ll improve the flexibility and speed when settling users’ funds.
Onboarding is quick and easy with a PSP, and users can split and transfer funds when needed.
From a regulatory standpoint, the PSP keeps you out the money flow for the funds owed to your users. The PSP also takes care of the steps required before making payouts, known as ‘KYC checks’. These checks identify and verify your sellers prior to payouts. This takes the compliance burden off your shoulders. So you can continue to grow, safe in the knowledge that the PSP has every aspect of payments covered. Which means onboarding is quick and easy with a PSP, and users can split and transfer funds when needed.
Adyen for Platforms, our solution for platforms, offers a compliant and customizable solution. It comes with specific features that meet the possession and control criteria. So your regulatory concerns are taken care of. Adyen is a licensed EU financial institution. So Adyen for Platforms collects sellers’ funds and securely holds them until settlement.
Scaling is key to business growth. But getting more sellers onboard requires a wide variety of checks. There’s a complex set of ID verification tools, in dozens of different countries to tackle during the onboarding process. Which means KYC checks are a necessary component of all platforms to stay clear of anti-money laundering and keep customers protected.
Adyen for Platforms takes care of the complex KYC checks and easily helps prevent fraud. It does this by utilizing the whole Adyen platform to track fraudsters. We keep you out the money flow by splitting payments between your commission and the amount settled to your users. This means that you do not come into possession or control of funds.
When growing globally, every country requires different payment methods. And you’ll need to payout to sellers with local bank accounts. With such a fragmented payments landscape out there, it’s much easier to rely on the expertise of a licensed PSP.
Setting up accounts in each country is a difficult, time-consuming process. But, without these in place, cross-border transactions can take a long time, and result in high payout fees. Adyen has local bank accounts in key markets. This allows for faster payouts and lower fees, which benefits both you and your users. With Adyen for Platforms, your platforms has room for flexibility, trust, and compliance.
Your platforms can then spend more time on running the business, rather than worrying about payment regulations such as PSD2.
We provide platforms operating in Europe with a platform payments solution that complies with all European compliance regulations. This means platforms don’t have to apply for their own payments licenses. And they can create their agreements with their sellers, in compliance with local payments regulation.
Adyen absorbs the compliance burden, which means platforms can focus on running their business. We hope you enjoyed reading and gained more information about the impact on PSD2 for platforms.
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