What are the main difficulties facing U.S. payments companies as they attempt to enter the European market?
Many US companies do not fully understand the regulatory approach in Europe. Some aspects are very similar to the US, but in other areas it can vary considerably.
Undoubtedly, the companies have the appropriate controls and procedures in place to meet regulations in the US, however we find that these will probably need adapting to meet the regulatory and terminology requirements in Europe.
Within Europe the focus is much more on the operational aspects of the business and many US firms are surprised that the assistance they need is from a regulatory specialist like Neopay rather than a lawyer.
In addition, US businesses are often unfamiliar with our ‘passporting’ system, where a business only needs to be licensed in one country to be able to offer services throughout Europe, as opposed to the ‘one licence, one state’ approach in the US.
Other issues are generally linked to business growth, for example ensuring scalability of the business, particularly in potentially resource heavy areas such as due diligence and on—boarding.
How does Neopay help to address these difficulties?
Neopay, as a market-leading compliance consultancy, helps companies develop, authorise and maintain their regulatory structure, and assists firms in implementing the requirements in their day to day operations. Through knowledge sharing, we ensure relevant personnel understand the environment they will be working under and are fully conversant with the requirements to which they must adhere.
What is the best way for companies to stay up to date on the various regulations?
There are various different directives and regulations within Europe, all of which are relevant to payments companies operating in the area. As part of our relationship with our clients, Neopay is able to offer ongoing regulatory updates via our Virtual Compliance Service (VCS). In addition to providing ongoing support service, VCS provides updates on all of these regulations as and when necessary, enabling the firms to concentrate on growing their business rather than conducting research.
In addition, joining an industry representative body such as the PrePaid International Forum (PIF) is invaluable for keeping up to date with developments in the industry and regulation. PIF acts as a principal point of liaison between the prepaid industry and government agencies, regulators and consumer bodies. It provides research, guidance and thought-leadership to members and the industry.
How does Neopay attempt to stand out from competitors?
Neopay has a 100% success rate in gaining authorisation for our clients.
Rather than just detailing the requirements, we ensure our clients understand the rules by which they are bound. We believe no business should adapt their model significantly to adhere to regulation. Our approach is to fit regulation around the business rather than fit the business into regulation.
How has Neopay’s role evolved over the years?
Neopay was originally founded to assist firms exclusively with the authorization process. However, as the business and client portfolio grew, so did the demand for services such as training, audits, ongoing support services, etc. We now offer a wide range of regulatory services that are tailored to fit any payments or e-money business of any size with their regulatory obligations.
What do you see coming over the horizon, in the e-money and mobile atmosphere, that companies should be looking for?
Within the UK, the new Payments Systems Regulator came into force in April this year. Its objectives include promoting competition, innovation and the interests of service-users. As part of this, it is taking steps to address issues relating to direct and indirect access to payment systems as well as looking into ownership structures and competition issues.
The 4thMoney Laundering Directive is in its final stage in Europe and will then be transposed into law in each country in the EU. There are a number of changes within this directive, but in particular for the e-money industry, changes to simplified due diligence including increased restrictions on their use could have a big impact for some companies.
The Payment Services Directive (PSD2) is also in the process of negotiation and is likely to be implemented in 2017. Alongside this, new Interchange Fee Regulation will be introduced.
Does the European Union provide a consistent regulatory framework across the individual countries or does each country have its own set of regulations?
All individual country regulation in the payments space stems from overarching ‘minimum standard’ European Directives. Each competent authority is then tasked with incorporating the Directives into local regulation and ensuring the rules are adhered to, up to and including enforcement action.
What are the most important regulatory considerations for new entrants to the market?
Each regulator within Europe will have threshold conditions set out, which are the minimum standards and requirements expected of firms. So before a firm even considers approaching a regulator, they must ensure they are physically located in that jurisdiction, have an appropriate and qualified leadership team there, and have enough capital to meet the minimum requirement. Extra to that, a firm must ensure that they are aware of the regulations under which they intend to operate, paying particular attention to the rights of the customer and the various anti-financial crime and money laundering requirements set down.
What are the sources of regulations and can companies influence the shape of them?
All local regulations in the EU originate from EU Directives. Firms cannot necessarily shape these directives, however they can feedback on draft versions of local regulation in the country in which they are based, during the consultation phase, and consistent views from the industry may be taken into consideration in the final release.
A lot of consultation and industry input occurs through industry bodies such as PIF. The UK Government consult with PIF to inform their approach in negotiations in Europe as well as in the implementation and adaptation of regulation within the UK. Most industry members use these organisations to ensure that their voice is heard within the development of regulation both at a European and UK level.
The Gaining Authorisation workshop, hosted by Neopay Ltd, takes place on 19 May as part of leading payment event Mobile Money & Digital Payments Africa which is held 19 – 21 May in Johannesburg. Mobile Money & Digital Payments Africa brings together the sector’s most influential individuals involved with financial inclusion, the development of payments technologies and widespread consumer adoption.
For further information and to register visit www.mobile-money-africa.com