feedback

If you have a gig/sharing economy business or online marketplace, there has been a big change in legislation that you need to know about

If you have a gig/sharing economy business or online marketplace, there has been a big change in legislation that you need to know about
  • Customer Agent Exemption
  • PSD2
  • Compliance
  • Regulation
  • Sharing Economy
  • + 3 more
30th Jul 2018
By Anna Tsyupko

Changes to the commercial agent exemption require action, but they will bring benefits to all involved

You may not have heard of the ‘commercial agent exemption', but if you have an online marketplace or gig/sharing economy business, you may have benefitted from it. Business such as these, known as ‘platform businesses’, connect buyers and sellers and pass payments between them, usually charging a commission.

What is changing?

Previously, platform businesses were able to act in this way without needing to become a licensed provider of regulated financial services. This was due to the commercial agent exemption, which enabled platform businesses to accept payments on behalf of sellers as their ‘commercial agent’ and later transfer them to their bank accounts.

However, the Second Payment Services Directive (PSD2) introduced in January 2018 changed this, though many firms are still unaware. Regulators found that in the platform business example, the platform is acting as not only the commercial agent of the seller, but also of the buyer, as they are receiving and processing orders on the buyers behalf. By being the commercial agent of both and taking all funds centrally, additional risk falls upon both buyers and sellers. Consumers run the risk that their money will be taken and be processed incorrectly, preventing them from receiving their good/service. As for merchants, they risk providing goods/services and their payments being delayed, mismanaged, incorrect or not received at all due to the problems with the platform.

One of the aims of PSD2 was to address this risk. PSD2 states that the exemption can be applied to a firm clearly acting on behalf of a seller or a buyer, but not both. Firms that do act on behalf of both, as with all platform businesses, must become licenced as a Payments Institution, or partner with a firm that is.

How to get licensed

Becoming licensed as a provider of regulated financial services is no small feat. You will need to obtain a licence from your country’s payment service regulator - with application processes often taking months or even years. In order to ensure you are meeting the requirements of your licence you will need to establish a compliance framework, which will necessitate dedicated staff. Due Diligence will need to be performed on all merchants/suppliers on your platform and a notoriously difficult to obtain client safeguarded funds account will be required for any of this to happen. Not only will all of this and more need to be delivered, but in a UX friendly way as to not deter customers and merchants from using your platform.

The alternative

The simpler, faster, cheaper alternative is to partner with a regulated payments provider. Whilst it is easy to interpret the change to the commercial agent exemption as a new obstacle for platform businesses, it can also be viewed as a blessing. Partnering with a payments provider not only allows you to meet the new regulatory requirements, but it passes the responsibility of managing customer funds to the payments provider. This is the reason Paybase was created - to allow firms to get on with doing what they do best, instead of being bogged down in payment reconciliation, compliance, KYC and everything else.

Partnering with Paybase will offer security to your consumers, merchants and yourself as a platform, all whilst alleviating the part of your business you don’t like dealing with. Embrace PSD2 - it’s there for a reason!

Twitter  LinkedIn

  • Customer Agent Exemption
  • PSD2
  • Compliance
  • Regulation

Related Posts

Sharing Economy + 3 more
What to expect from the first Paybase Workshop

The first #PaybaseWorkshop is fast approaching and we’re really looking forward to bringing together a lot of innovators in the platform business space. The event has now sold out, but if you weren’t able to get a ticket, we will be hosting many more...

Read More
Events + 3 more
Paybase Event! Marketplaces and Gig/Sharing Economy Platforms - Fast Track Your Success

On October 11th Paybase is hosting a collaborative workshop and networking event for online marketplaces and gig/sharing economy platforms. You may be wondering why we decided to host such an event, and why we’re so excited about it. In this blog, we...

Read More
Paybase + 2 more
Paybase Profiles – Jarina

Our Head of Operations Jarina recently celebrated her 1 year anniversary here at Paybase. We sat down with her to discuss all things Ops and more! So as Head of Ops, what does your day-to-day look like, Jarina? I’d describe my role as knowing what...

Read More
Read All

Get our newsletter

Join our mailing list for product launches, industry hosted events and company updates.

Top 50 most disruptive uk companies in 2017: the future 50