During my “European payments regulation” presentation at the Grad School hosted by Payvision during CNP EXPO | Orlando, I talked about the regulatory ins and outs that operating in the European Union has, for those players interested in expanding their business to Europe or to improve their already-existent European activities. Europe has a quite complex regulatory landscape, which is fragmented and constantly flooded with new regulations and legislation issued by different authorities.
This leads to several concerns.
First, most of the initiatives are regional rules, while the CNP environment is global, which might lead to issues:
- On competition;
- And on customer experience, which might be different depending on applicable local law.
Second, as I said before within the payments regulation there are plenty of rules and requirements flooding the market, coming from different bodies and sometimes, regulating similar issues. This has obvious consequences, such as overlaps, conflicts and inconsistencies between the initiatives; and increased complexity (as there are too many rules that are either too vague or too prescriptive and which are too difficult to monitor).
Therefore, some of those rules might be untimely and unnecessary if we look at some of the rules and proposals that try to regulate scenarios that self-regulation already covers (with relative success). For instance, strong customer authentication mandated in the proposal for a revised Payment Services Directive. Card schemes regulations already have liability shifts in place, which steer customers and merchants to secure authentication methods.
The tips I provided to mitigate all the mentioned obstacles within the payments regulation were the following:
Firstly, it’s key to choose the appropriate European partner, as it might help the non-EU companies:
- To learn from the partner’s knowledge in order to deal with the complexities of a fragmented market, constantly flooded with new regulations and legislation;
- To shape the legislative process in their interest and business convenience;
- To gain contact & access to the European card schemes;
- To benefit from the partner’s global acquiring network;
- And to be more efficient through the scale economies resulting from the outsourcing arrangement.
Secondly, it’s also important to have a licensing strategy. A license is not always a must if you wish to do business in Europe; PSPs can operate through the partner’s own license. However, if the company is willing to operate in the EU in its own name and risk, obviously a license is necessary. In which case:
EU partner can advise the company on how to apply for the license, since picking the right license in the right country of establishment is key if we have in mind:
- Efficiency and convenience;
- And finally, the line of business one wants to be in.
Lastly, I added one piece of advice related to the ECB Recommendations for the Security of Internet Payments that are to be implemented shortly by Schemes and online PSPs. In this respect, Payvision, together with its partner Innopay, has issued a White Paper to help the readers not only to cope with the potential new framework but also to start digging into the ways forward in terms of authentication technologies and trends.