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ISVs and marketplaces: are you ready for PSD2?

Thursday 1 August 2019 | 08:22 AM CET

Ralph Dangelmaier, CEO of BlueSnap, presents the impact PSD2 has on marketplaces and independent software vendors and best practices for compliance

Over the past few years, several European payment regulations like PSD and 3-D Secure, which impact data, security, payments, and banking, have changed the course of global ecommerce. In this quickly-evolving landscape, many platforms, marketplaces and independent software vendors (ISVs) are left wondering: how will this impact my business? And what can I do to stay afloat?

Initially, you might have balked at these new regulations, worried about the wrench they’d throw in your day-to-day operations — but the truth is, if you can learn to adapt, these regulations present an opportunity to enhance processes, not hinder them.

Let’s dive into the European regulation affecting ISVs the most, the impact it’s having on marketplaces and the steps you can take to ensure compliance.

What is PSD2?

The Second Payments Services Directive (PSD2) came into effect in early 2018, and it set forth stricter requirements for electronic payments, including increased transparency into payments processes and greater protection over consumers’ own financial data. For customers who utilise marketplaces, platforms and ISVs, PSD2 means lower fees, reduced risk of fraud, and greater visibility into the payments process.

However, PSD2 now prevents businesses and online retailers who do business in the EU from engaging in traditional models of payments management. For example, many marketplaces act as a middleman and choose to send goods to consumers from the closest regional supplier and collect payments before settling with the merchant. With PSD2, they are no longer allowed to pull customers’ money into their own accounts and handle the transaction with the most relevant, cost-efficient supplier after the fact, unless they are a regulated payments institution. The flow of money must now go directly through these regulated institutions for a more secure and streamlined customer experience.

Although this may seem like a more complex process for marketplaces, non-compliance with the new directive will lead to fines, and eventually, the potential shut-down of your business. So unfortunately, non-compliance is not an option.

So what can you do to comply?

Short of becoming your own payments institution, which comes with unnecessary costs and financial risks, you need to streamline the operational flow of funds using regulated third-party providers who can manage the flow.

You could try to find multiple providers who supply parts of the process and then piece them all together. But between a regulated ewallet provider, a subscription provider, reporting capabilities and a file transfer system to ensure the funds are reconciled properly against each transaction that’s taken place, that’s a lot of different accounts and integrations to juggle.

The good news is, there are payment service providers out there that are regulated and can provide all of the necessary parts of the process to comply with PSD2. If you can find the right partner to handle your payments under the new regulations, this will ultimately be a better, more appealing solution for you and your customers. Buyers today are expecting solutions that are fast, transparent and with few additional fees, and if you can meet those expectations, you can differentiate yourself from your competitors.

Global businesses require global compliance

In today’s global economy, taking payments from around the world just makes sense — but that doesn’t mean it doesn’t come with its own set of challenges. Now that you understand the European regulation most relevant to ISVs and its impact on the way you do business, it’s time to take action.

By partnering with a regulated payments institution, you can ensure the flow of funds through your business happens smoothly, easily and with little risk of fraud or failed payments.

About Ralph Dangelmaier

Ralph Dangelmaier is the CEO of BlueSnap. He previously served as the President of ACI Worldwide and as CEO of P&H Solutions. He is a frequent speaker at fintech conferences worldwide, and has authored numerous articles in tech, payments, and ecommerce publications. Recently, Ralph was named as one of the Top 50 SaaS CEOs by the SaaS Report and CIO Bulletin.

About BlueSnap

BlueSnap provides an All-in-one Payment Platform that accelerates commerce for B2B and B2C businesses. With a single integration, businesses can accept any payment with ease and gain access to 100 payment types, e-wallets, built-in fraud prevention and detailed analytics to help grow and protect revenue. Learn more at http://home.bluesnap.com/.

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