Payments and the Law: Regulatory hurdles you must jump

March 23, 2017 Payments
John Rampton
By John Rampton, Founder, Due
John Rampton
By John Rampton, Founder, Due


Although being able to offer online and mobile payments, including convenient payment methods like credit and debit cards, digital wallets, peer-to-peer payment systems, eCash, and eChecks, has opened up a world of opportunity to you and your business, it has also created some hurdles. You or  your payment company face barriers in the form of regulatory issues that you will have to handle or face fines, penalties, and even the loss of your ability to make online payments.

While they can appear a nuisance, regulations are put into place to protect your business and your customers. That’s because there’s been a proliferation of fraud and lack of standardization in what has been a rapidly advancing industry. And there are ways that you can leap over the hurdles.

So, what are these regulatory hurdles?

International Regulations

One of the largest sets of regulatory hurdles comes in offering global payment capabilities. These are important if you currently do business overseas or want to in the future. The problem is that payment structures and processes vary from country to country each with their own unique regulations in terms of how people can be paid. This includes regulations related to currencies and taxation as well as regulations directed at certain payment types like cryptocurrency and prepaid cards.

For example, the Payment Services Directive in the EU was designed to standardize payments so they would become more efficient, secure, and user friendly. Specific regulations were established for wire transfers, direct debits, and card payments. In these cases, it’s a matter of understanding what the regulations are and then determining if you or your payments provider can adhere to them with your current processes. If not, then you’ll need to determine if you can change those to suit these regulations.

Technical changes are now making it easier, including an e-commerce payment system framework that is focused on standardizing payment systems so that regulations can also be standardized for easier adoption and transactional relationships with numerous countries. Certain solutions like net banking, cryptocurrency, and online payment providers have emerged that also help you overcome these hurdles tied to handling international payments.

Security Regulations

With ongoing issues with fraudulent activity and data breaches, security has climbed to the top of the regulatory ladder. Standard measures, like PCI compliance in the U.S., operate as a means of increasing security for everyone involved in payments. PCI compliance is legally required and updates annually to keep up with changes around fraud. Example regulations include adding a certification from a certification authority, the use of EMV/chip readers, and specific instructions on what type of data can and cannot be stored.

With PCI compliance, there are four levels of compliance so it’s important to choose the one that works for your business and that covers those aspects of what you do in relation to your business model. For example, Level 4 is for a small business that does less than 20,000 online payments a year while the other levels are for those that do significantly more.

Soaring over regulatory hurdles related to security involves investing in more security and ensuring that you work with a payments processing company that gives you the tools and knowledge to ensure compliance with the continually changing list of regulations.

The Durbin Amendment

Another regulatory hurdle to consider is the Durbin Amendment that is intended to set limits on the interchange fees paid by merchants for debit card purchase transactions. Often, these swipe fees are passed along from a merchant services provider. While it’s not necessarily a hurdle for your business, it may be one for your processing company and one you can leverage to ensure you stop paying so many fees.

In looking to overcome the hurdle of regulations designed to lower fees that may actually increase fees for your small business, you can focus on getting other fees associated with processing reduced by shopping around. Plus, you can continue growing your card processing volume to give you more negotiating power.


About the author

John Rampton

John Rampton, Founder, Due

John Rampton is an entrepreneur, investor, online marketing guru, and startup enthusiast. He is founder of the online payments company Due. John is best known as an entrepreneur and connector. He was recently named #2 on Top 50 Online Influencers in the World by Entrepreneur Magazine and a Blogging Expert by Time. He currently advises several companies in the SF Bay area.

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