This opinion piece is posted in Global Banking & Finance Review, and the author is a CEO of a UK payments fintech named Adflex. As members of CEP will know from reading our recent report on regulations in the commercial space, PSD2 was passed by the EBA in 2015, and one component of that is SCA (Strong Customer Authentication) was originally slated for September 2019, but enforcement sort of pushed back to January 2021.
In addition, the UK FCA has pushed back their deadline to September, 2021. The author’s point is that even these delays may not be enough time, given some of the complexities involved in B2B types of transactions. Being in the middle of these types of transactions offers a glimpse of the B2B scenario complexities.
‘None are feeling the pinch more than B2B merchants. Unlike B2C e-commerce firms, those in the supply chain routinely support multiple legacy transaction systems (POs and invoice systems, 30 day payment terms, BACS transfers, postal cheques) as well as card payments, making SCA just one of a whole host of payment-related challenges to contend with throughout the Covid-19 storm….The complexity of B2B payments throws more fuel on the fire. Supplier and buyer contracts commonly specify nuanced and flexible payment programmes linked to stock availability, throughput and forecasted demand for goods. How should these order and payment models, many of which are settled with corporate purchasing cards, be catered for under SCA? Manufacturers, for example, can take card payment details from a buyer at the point they place an order, so they can secure – but not yet take – their payment. But when that order takes weeks to fulfil, when should the SCA procedures take place? At the start? Or when the order is shipped? What about when a buyer’s corporate card details that are taken over the phone, via post or email, and then entered by the supplier into their own web-hosted payment system?’
The author goes on to discuss exemptions for corporate cards that operate in a secure environment (for example, virtual cards) but also points out the difficulties in clearly defining these transactions, depending upon what an issuer may require. There are also ‘exceptions’, but these are quite difficult to prove, therefore leave merchants shaking their heads.
He does point out that solving the issue should put merchants in good stead to improve business results. One of the ways to do that is to find a payments specialist partner to guarantee compliance and future-proof for ongoing regulations. Worth a quick read.
‘For many B2B firms, this is the root of the problem: clearly understanding what changes need to be made to their payments acceptance process and in what circumstances they should be applied. Then comes the job of upgrading their systems. Corporate card programmes from different schemes and issuers have varying parameters for implementation, making an across-the-board change in response to regulation impossible. Instead, it spirals into complexity and becomes a costly drain on resources. Increasingly, these upgrades need specialist experience which, frankly, no modestly resourced supply chain business should reasonably expect to develop inhouse, let alone in the middle of what must be one of the worst-hit trading years on record.’
Overview by Steve Murphy, Director, Commercial and Enterprise Payments Advisory Service at Mercator Advisory Group