How can merchant payments firms navigate the European regulatory landscape?

With a central bank digital currency (CBDC) anticipated to be launched in Europe soon, it is becoming increasingly important that merchants can prepare to accept such a currency.

In a recent post from PassFort, the company underlined key challenges for the merchant payments industry in navigating the payments regulatory landscape in Europe and the best ways to deal with it.

PassFort said, “The launch of a digital currency in Europe is in train. Merchants and merchant payment solutions providers need to get ready to accept this currency. This means technological adaptation, but it also means understanding the regulations that will be associated with the currency, and any new compliance requirements.”

The biggest issue facing the merchant payments industry, PassFort claims, is the ever-expanding amount of regulation. A key concern for merchant payment solutions providers and their merchant customers is planning well enough for regulatory change.

The company continued, “Regulators aren’t truly engaged with the merchant payments ecosystem, and they need to be before new laws are introduced – only then can the full implications be understood. And, merchants need to commit to staying abreast of emerging legislation to understand the impacts on transactions, as well as their compliance obligations.”

A key thing creating complexity in the industry currently is that some regulatory initatives don’t appear as though they directly affect merchants, when in fact they do. Much of the focus of new regulation, PassFort claims, is on data – control, management and protection of personal data. Another issue is that there is some urgency in terms of changing legislation, while the timelines proposed are impractical for the complex merchant payments ecosystem.

According to PassFort, many merchants have been pulled up short by not engaging on knowing enough about the proposed regulatory agenda.

The firm cited the recent Secure Customer Authentication (SCA) legislation that was intended to be implemented on the same day across Europe. While the legislation ‘was only considered pertinent to regulated entities’ its impact went far beyond this, and some reports have suggested that payments in some sectors have been driven offline as a result of the legislation.

PassFort said, “In order to navigate this new and changing compliance landscape, it’s crucial merchants stay up to date by joining or remaining on mailing lists that share policy news and information. The European Commission has various websites they use to update the financial services community on regulatory change for example.”

How can companies stay abreast of regulatory developments? PassFort cites the fact that trade bodies across Europe and in the UK pick up and share such developments, with the Payment Systems Regulator producing interesting reports and reflections around digital payments changes. Industry conferences are also key, the company claims.

The RegTech firm continued, “Ultimately, increasing awareness of legislation helps keep on top of change and keeps fraudulent activity at bay, which helps increase conversion rates and improve customer retention, so it’s in a merchant’s best interests to stay ahead. A greater balance is starting to emerge between regulators and merchants over planned changes and understanding how those changes impact operations.

“Regulatory bodies are coming to a better understanding of the merchant ecosystem and how new laws will affect it. They are reaching out beyond regulated entities into the wider ecosystem to include other stakeholders, which is crucial to determining all the consequences – good and bad – of new legislation.”

Read the full post here.

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