Every December, I like to take a moment to look back at how the year went. Let’s just say 2019 saw its share of business aches and pains.
I think we all deserve a collective massage after working through the many twists and turns from regulatory and compliance issues due to the ongoing Brexit saga and more.
Though it’s been challenging at times, we’ve learned a lot. I think it’s therapeutic to review how far we’ve come and what we accomplished. My final 2019 column highlights some of the major pain points from this year and offers hope for a much smoother 2020.
1. Regulations and Compliance
Keeping up with new regulations has kept everyone busy.
Europe initially set a deadline of September to enforce stronger payment safeguards through its updated Payment Services Directive (PSD2). Payment processors, banks and merchants rushed to meet the deadline, only for the majority of European governments to postpone enforcement, as much of the industry simply wasn’t ready.
Each European country will now decide when to start enforcing PSD2, which mandates secure customer authentication (SCA) for EU-to-EU transactions. Guidance from the European Banking Authority (EBA) suggests this shouldn’t occur until Dec. 31 this year. The good news is that many providers, such as Segpay, implemented SCA ahead of the deadline in the form of 3-D Secure (3DS) version 2.0. With it, we are already providing an additional layer of protection against fraud and chargebacks through more intelligent analysis of consumer data. And, we’re ready to step it up once the regulation goes into effect.
That added protection will also help merchants comply with Visa’s new rules for chargebacks (which they now call disputes). Effective as of October, the newly named Visa Dispute Monitoring Program is designed to help merchants manage fraud and risk. It allows up to 100 disputes per month and a maximum 0.9 percent ratio of total disputes to total sales (down from a 1 percent ratio) with an early warning at 75 disputes and 0.60.
Mastercard introduced new rules of their own in April, mandating new notifications on rebills for subscription product sales. More change is on the horizon in 2020 as Visa will implement a similar notification process on all recurring subscriptions originating from a trial. This is also scheduled to begin in April.
Finally, here in the U.S., California is about to launch the first domestic privacy regulation, the Consumer Privacy Act (CCPA) on Jan. 1 in 2020. It is considered one of the most comprehensive privacy laws in the country, giving consumers more control over their personal information. We know it will impact everyone doing business in the state but how the law will be enforced is still not clear. Those who prepared for GDPR should be ready. However, this will be one to monitor as details continue to come in.
2. Banking, Accounts and Deposits
In Europe, banks have become unwilling to settle USD funds for dollar transactions, with all the reporting requirements that come with doing that. As a result, we’re finding EU merchants looking to set up U.S. subsidiaries in order to process USD through a U.S. acquirer. U.S. banks have been — let us say, inconsistent — about handling bank accounts for adult merchants and allowing them to settle funds to their models, affiliates and others.
Alternative payout solutions are needed, which is why we introduced our own in 2019, allowing merchants to seamlessly pay affiliates, models, producers, vendors or contractors in a timely manner. Merchants should be able to rely on a true end-to-end solution, from checkout to processing to payouts.
3. Brexit
Anyone doing business in Europe is very likely challenged by Brexit and the uncertainty around it. Once the U.K. leaves the European Union, U.K. merchants will need to process payments through a U.K. acquirer and will no longer have the benefit of a single EU entity to provide access to all EU countries. Brexit will affect payment facilitator/IPSP arrangements, as well.
For example, processors will have to be licensed in both the U.K. and EU to fully support all of Europe. Our new Ireland location, for instance, will provide payment and merchant services through an EU-licensed payment institution.
Overall, we should finally have some closure in early 2020 as the next Brexit deadline is scheduled for Jan. 31.
4. U.S. Processing Solutions
In the U.S., only three acquirers currently process high-risk payments, making it challenging for some merchants to place their business. Our industry needs additional U.S. acquirers to wade into the adult space and help add redundancy. In Europe it’s a different story, there are many acquirers that compete for the adult market, which has helped keep rates more competitive. As an industry, we need to find and encourage that type of competition in the U.S. during 2020.
5. Coalition to Lobby for the Adult Market
Organizations like the Free Speech Coalition (FSP), Association of Sites Advocating Child Protection (ASACP), Pineapple Support and others work on behalf of our industry to support adult workers and advocate for common sense legislation and card brand rules. The pain point here is that we need more advocates on the front lines to support and participate in organizations like these to help ensure our industry remains protected.
As we look ahead to 2020, we’re all smarter and better able to face these challenges. The fight against fraud will feature new tools in 2020, as we seek to integrate Visa’s Merchant Purchase Inquiry (VMPI) to help mitigate chargebacks. New ways to convert traffic and more payment options are on the way to help drive sales around the globe. This year’s challenges made us all stronger and helped sharpen our focus on what’s ahead in the new year.
Cathy Beardsley is president and CEO of Segpay, a global leader in merchant services offering a wide range of custom financial solutions including payment facilitator, direct merchant accounts and secure gateway services. Under her direction, Segpay has become one of four companies approved by Visa to operate as a high-risk internet payment services provider. Segpay offers secure turnkey solutions to accept online payments, with a guarantee that funds are always safe and protected with its proprietary Fraud Mitigation System and customer service and support. For any questions or help, contact sales@segpay.com or compliance@segpay.com.
