The 5th Electronic Money Association conference (EMA) took place in October 2015, in Brussels. The bi-annual event facilitates a two-way conversation between regulators and EMA members on the upcoming legislative changes in European Economic Area (EEA), such as the Revised Directives on Payment Services (PSD2) and Fourth Money Laundering Directive (4MLD).
The conference is particularly timely because the payments regulatory environment is currently in a state of flux. The upcoming governing changes leave a number of items open to interpretation and debate, and the conference presents the perfect opportunity for PSPs and e-money institutions to voice their concerns. As well as exposure to new legislation and interaction with regulators, attendees are given visibility on the latest trends in the industry. The hottest topics were security and passporting, home-host authority coordination, as well as the practical implementation of PSD2.
Balancing security with customer service
Regulation is shifting from soft to hard implementation, which can be complicated for alternative PSPs and other financial institutions. The imminent PSD2 and 4MLD will have an impact on how businesses interact with their consumers and other PSPs.
It is going to be particularly hard for merchants to strike a balance between security and customer service, bearing in mind the revised directives are to be implemented via a two-step approach. Firstly, in compliance with the EBA Guidelines. Secondly at a later stage, in line with the more stringent requirements such as two-factor authentication, applicable once PSD2 is effective.
A regional approach to regulation
The EMA also invited speakers from outside the EEA to discuss recent regulatory changes in their local jurisdictions. Financial institutions explained the requirements for setting up business in domestic and overseas authorities, and the policy requirements laid out by regulators for obtaining local licenses.
By attaining a local licence, a business is required to be compliant with general local law. While it is necessary for financial businesses to ensure they comply with regulators, and that the system is safe for consumers and merchants, they cannot be in a position where the compliance cost is disproportionate to the value of business in that country. Therefore, obtaining a local licence is just the starting post, not the winning one.
We also heard information from Fair Trading NSW Australia about the Murray Financial System Inquiry in Australia, and the very recently announced cap on surcharges, which until now could be up to ten percent of a transaction value.
Virtual currency regulatory complexities
From a virtual currency financial services perspective, members discussed the fact that existing financial regulation is incredibly complicated to implement. When existing regulation is dropped on to a virtual currency exchange company, a number of requirements become irrelevant or are very troublesome to implement. Such financial companies are lobbying for changes to regulation in accordance to their specific services.
Make sure your voice is heard
In light of the upcoming regulatory changes, the EMA recommends that PSPs and other e-money service providers enlist knowledgeable consultants, and identify institutions that follow the development of new regulation and introduction of new legislation.
Join either a domestic or international industry associations in which you have an opportunity to exchange views with other PSPs, and allow you to more effectively engage with regulators. Most importantly, ensure that your voice can be heard.