When a Central Bank digital currency is launched in Europe, merchants will want to accept it. The transition will be about planning for new regulation as much as adapting to the new technology.
The launch of a digital currency in Europe is in train. The bank of England has issued a consultation process on introduction of a digital pound. Merchants and merchant payment solutions providers need to get ready to accept a new type of currency. This means technological adaptation, but it also means understanding the regulations that will be associated with a digital currency, and any new compliance requirements.
A significant issue facing the merchant payments industry is this ever-expanding amount of regulation. A key concern for merchant payment solutions providers and their merchant customers is adequately planning for change.
Regulators and the merchant payments ecosystem will need to engage fully before new laws are introduced, as then all implications can be understood. Merchants also need to commit to staying abreast of emerging legislation to recognize the impacts for transactions, as well as new compliance obligations.
Some regulatory initiatives don't always appear at first glance as though they directly affect merchants when in fact they might, which creates some complexity. Much of the focus of new regulation is on data - control, management, and protection of personal data - i.e., who is responsible for what when it comes to data. The Data Act or Data Privacy laws aren’t necessarily payments specific, but they still impact ways of operating.
Many merchants have been pulled up short by not engaging or knowing enough about the proposed regulatory agenda. Lessons are being learned about how to bring merchants into future legislative discussions.
Secure Customer Authentication (SCA) is an example of a piece of legislation that was intended to be implemented on the same day across Europe. The legislation was only considered pertinent to regulated entities. However, its impact went beyond that, with reports suggesting payments in some sectors have been driven offline as a result of SCA.
We are all on a journey of digital transformation, use of cash is dwindling and there is increased choice when it comes to payments. Merchants and payment providers are part of this transformation and the new digital economy. This means keeping abreast of regulatory changes proactively and preparing in advance.
To navigate a new and changing compliance landscape merchants can 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.
There are also trade bodies across Europe and in the UK that pick up and share regulatory developments. From a UK perspective, the Payment Systems Regulator (PSR) produces interesting reports and reflections around changes in digital payments.
Industry conferences are a good source of knowledge. For smaller merchants, who don’t have the resources to engage directly, it may be worth going through industry bodies. Paying close attention to these channels and listening to policy makers could help.
Ultimately, increasing awareness of legislation helps keep on top of change and compliance.
A balance is emerging between regulators and merchants over planned changes and understanding how those changes impact operations.
Regulatory bodies engaging with the merchant ecosystem and how new laws will affect it means reaching out beyond regulated entities into the wider network of stakeholders, which helps determine the consequences - good and bad - of new legislation.
At a European level, there is a Payment Systems Market Expert Group, which has representation from technological providers and the merchant community. Several players in the UK are also in discussions about setting up a forum to bring together participants from across the payment community.
The MPE 2022 conference in Berlin in July last year was for merchant payments stakeholders to discuss upcoming regulation; reviewing topics such as the EU Retail Payment Strategy, the European Payment Strategy, digital currencies, and PSD2 compliance.
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