Regulations bar platforms and marketplaces from transferring funds without a license solarisBank’s offers a solution that allows businesses to comply effortlessly Online platforms and marketplaces currently face lots of uncertainty when it comes to payment regulations. Additionally, national regulators will implement Payment Services Directive 2 (PSD2) in January of next year. Many online platforms and marketplaces seem to be unprepared for it.
Their business models may even violate existing European Union and national regulations governing money remittance, and they could face very serious consequences. The coming implementation of PSD2 may refocus regulators attention on non-compliant operators. solarisBank wants to help platforms and marketplaces meet this challenge with our innovative Platform and Marketplace Payments Solution.
The Regulatory Challenge
Typically, online platforms and marketplaces connect buyers and sellers of products and services. Many also effectively facilitate payment by receiving funds from buyers on one side, subtracting their fees, and transferring funds to sellers on the other side. In effect, they engage in a form of money remittance, an activity heavily regulated by EU and national laws, and watched over by financial supervision authorities.
These regulations exist for several important reasons. Non-compliant marketplaces can put buyers and sellers at risk. For example, if a buyer pays for a product or service directly through a non-compliant marketplace, and the marketplace goes bankrupt, the buyer risks losing their money forever. Sellers can face similar risks if they front products or services before receiving payment.
To minimize these risks, the European Commission introduced rules regulating money remittance in the first Payment Services Directive (PSD), implemented in 2012. Since then, handling these payments without a payment license is illegal in most circumstances. Current regulation stipulates that payments between buyers and sellers cannot pass through the accounts of unlicensed online marketplaces. However, platforms and marketplaces can comply by partnering with a licensed payments institution such as solarisBank.
However, the many national regulatory bodies across EU countries have interpreted the directive differently and issued various exceptions, leading to a patchwork of “grey areas” and uncertainty in the market.
The European Commission responded to this concern by issuing a second directive, PSD2. Scheduled for implementation in January 2018, it will introduce new measures as well as clarify existing ones in order to promote more consistent enforcement across the European Union. Companies that do not comply could face hefty fines or even shut-down orders. The European legislator is also responding to the fact that online platforms are fast becoming an important part of Europe’s digital business landscape.
With PSD2 coming into force in just a few months, companies that operate online marketplaces now have three choices:
- Get their own payment license (a prohibitively difficult, expensive process that can take many months)
- Find a partner with a license to handle these payments, or
- Go out of business.
solarisBank has developed a technologically advanced, easy-to-integrate solution to enable B2B platforms and marketplaces to fully comply with EU and German payment regulations.
Traditional banking players have been unwilling or unable to respond to this need. We approached the problem as a tech company laser-focused on helping digital players meet technological and regulatory challenges in finance. In addition to our tech focus, solarisBank has a full German banking license, maintains a full legal and compliance team and is regulated by the German financial authority, BaFin.
Our Platform and Marketplace Payments Solution is designed to make compliance as frictionless as possible. Partners simply need to sign up and integrate our API to get started.
Since platforms and marketplaces can’t transfer customer money from their own accounts without a license, we combine our banking license and tech to do it for you. Using the solarisBank Platform and Marketplace Payments Solution, your customers still do business via your platform.
The entire process runs seamlessly in the background, ensuring an excellent user experience. Your online platform retains full control over customer data, communication, user experience and customer relations. At the same time, all money transfers occur via the solarisBank account, ensuring a strict separation of funds and thus maintaining full compliance with payment regulations.
Furthermore, with solarisBank’s German banking license this solution can be fully passported across the European Union and the European Economic Area, making it attractive to companies registered in or operating in more than one country.
The solarisBank Platform and Marketplace Payments Solution gives marketplaces peace of mind and allows them to concentrate on growing their business.