As the payment facilitator model evolves, the card networks are increasingly embracing it as a driver of merchant acceptance globally. A recent rule change from Visa further affirms that PFs are in a solid position.
China has become a popular example of the potential for digital transactions to overtake cash, as its citizens’ mobile payments usage has increased exponentially in just the last few years. The use of QR codes is quickly displacing cash use across its cities.
But according to recent media reports from the region, not everyone there is necessarily happy with the disappearance of cash or the pervasiveness of mobile payments.
Last week, Acting Comptroller of the Currency Keith Noreika told the audience during an address in Washington, D.C., that he thought regulating nonbanks through a federal fintech charter was “a good idea.”
Noreika, a Trump administration appointee, defended the OCC’s right to establish the charter championed by his predecessor, Obama appointee Thomas Curry, despite states’ claims to the contrary.
The varied state approaches to money transmitter laws are a common headache for many payment facilitators. Affected companies dream of a uniform system, where adhering to the requirements in one state means that you can operate in other states as well.
The road to that system is long, but the good news is, baby steps down the path are continuing.
Payment facilitators have many tools at their disposal to help them understand the risk of taking on a particular merchant’s business during underwriting. In many cases, though, the tools rely on information provided by the merchants themselves.
To validate that information merchants have provided, however, PFs have a vast resource for fishing out the true nature of the merchant’s business and the identities of the people involved.
Stockholm-based Klarna has secured a banking license from the Swedish Financial Supervisory Authority.
With this license, the company can operate as a bank across the European Union. And according to Klarna, securing the license makes it one of Europe’s largest banks right out of the gate, with 60 million customers.
The company sees itself as a formidable competitor to Europe’s banks.
Interest in the business of payment facilitation is growing, not just among companies lured in to monetize transactions and the investors excited to fund fast-growing startups, but also regulators wanting to make sure a new third party isn’t taking advantage of consumers.
And all these eyes on the industry mean payment facilitators themselves, and companies thinking about switching to the model, are hungry for more information about how to run their business to take full advantage of all the opportunity in the space.
There may well come a day when money transmitter laws are consistent across state lines. Baby steps in that direction, however, underline the complicated work that lies ahead if such a dream is to become reality.
The Conference of State Bank Supervisors recently announced its plans to move toward a consistent framework for regulating non-bank entities, including financial technology companies – a plan it called its Vision 2020 initiative.
As third parties, payment facilitators have a complicated regulatory framework to wade through. And it’s unlikely to get untangled any time soon, especially as state regulators look to clamp down on a payments industry they don’t fully understand, according to panelists at Payment Facilitator Day during the ETA’s TRANSACT 17 conference.
Prepaid, money transmission, data and cyber security, these are perennial worries, one panelist said, but one particular trend in state regulation has her very nervous.
Developers, according to Square Developer Lead Carl Perry, are the most important community for many payment facilitators.
It’s not something payment facilitators hear very much, but developers are a core part of the business, and payment facilitators need to make the building of payment solutions streamlined for this group.
And this is especially important as payments and all the features around payments become more complex. With increasing consumer payment options, such as NFC, EMV and bitcoin, and multichannel strategies for acceptance, developers have a challenge to build solutions that keep up with buyers’ quickly changing demands of payments whenever, wherever.
In a roundup of this week’s news, major card brands are continuing their expansion of digital payments acceptance, targeting cash usage at small and micro businesses and at festivals. And eMarketer ventures a prediction about the cross-border e-commerce shopping habits of German consumers.
In many respects, India’s 9-year-old Aadhaar national ID system is a global model for simplifying payments, banking and payroll operations. It was designed to be a comprehensive database allowing easy access to bank accounts and other payments mechanisms. As a concept, it worked brilliantly.
But according to data from a report from the Centre For Internet and Society, it also serves as a world-class example of security recklessness, with methods so sloppy that they could have exposed sensitive data about almost a quarter of a billion Indian citizens.
One barrier to entry for companies considering the payment facilitator model has been creating their own framework for enabling merchant acceptance from scratch.
In response, consultants Todd Ablowitz and Deana Rich have teamed with technology services company iClassPro to introduce Infinicept, a company that offers what they say is the first platform built specifically for payment facilitators.
The platform, known as Payment Facilitator in a Box, offers infrastructure that PFs need to get merchants up and running on their systems, including a new, proprietary underwriting tool.
Next week’s Payment Facilitator Day – an entire day of content by, for and about payment facilitators at ETA’s TRANSACT conference – promises to be a wealth of informative conversations for companies in the space or considering it.
The lineup of experts includes innovative payment facilitators who are leading the way in the PF market, as well as investors who have helped payments companies strategize and grow their businesses.
If your company is exploring becoming a PF, it is important to understand the relevant drivers behind becoming a PF as well as the impact your decisions have on the operations of your business.
Registering as a PF is not a panacea for making payments easier, and in fact, can be a drain on the resources within your organization.
You already know you want something more than a traditional merchant processing referral relationship. Identifying what you are trying to accomplish with a PF model while analyzing the various options to meet those needs, rather than focusing on simply becoming a PF, is a valuable exercise.