Payment license for e-commerce marketplace

Amidst the ever-shifting landscape of e-commerce, a diverse array of market participants has emerged, ranging from industry titans exemplified by eBay to niche innovators typified by Asos.com. These visionary entities have meticulously curated their market positions, promising not only substantial expansion but also attracting discerning venture capitalists.

Within this dynamic context, the European Payment Services Directive, known as PSD1, has brought forth a pressing matter. This concern revolves around an exclusion mechanism fervently sought by a select cohort of e-commerce marketplaces. This mechanism confers upon them the authority to operate as intermediaries in payment transactions, adroitly circumventing the complexities of obtaining a payment institution license. At its core, this exclusion centers on financial transactions instigated by a payer, conventionally the buyer, and directed toward a payee, typically the seller or merchant. These financial transactions are orchestrated with the intermediation of a commercial agent, often personified by the marketplace operator. This designated commercial agent is duly empowered to engage in negotiations or conclude transactions on behalf of either the payer or the payee, a statutory provision expounded within Article 3(b) of PSD1, popularly denoted as the “Commercial Agent Exclusion.”

A pivotal tenet of the Commercial Agent Exclusion stipulates that the intermediary, typically embodied by the marketplace operator, is obligated to serve exclusively as a commercial agent for either the facilitation of negotiations or the finalization of transactions, rather than performing both functions concurrently. The prevalent interpretation of this exclusion appears to be accommodating e-commerce marketplace providers who have intricately structured their operational framework to function as commercial agents for their clientele, proficiently overseeing financial transactions. This operational paradigm usually empowers the party initiating financial disbursements, generally the buyer, to fulfill their financial obligations to the ultimate recipient of these funds, often the seller, once the funds have been received by the commercial agent.

However, despite the considerable interest and reliance on the Commercial Agent Exclusion by various marketplaces, securing universal acceptance among regulatory bodies within the European Union has proven to be an arduous endeavor. Significantly, the German regulatory authority, BaFin, has publicly voiced reservations about its application, leading to a conspicuous schism within the EU concerning the eligibility of operators to avail themselves of this exclusionary provision.

This quandary lies at the core of the impending PSD2, an iteration of PSD1. This proposed modification, dating back to June 2, 2015, endeavors to redefine the Commercial Agent Exclusion, substantially narrowing its purview. It restricts the exclusion solely to payment transactions initiated by the payer and directed exclusively toward the payee. Such transactions must be exclusively conducted through a commercial agent explicitly authorized to negotiate or conclude the sale or purchase of goods or services on behalf of either the payer or the payee. This revision is explicated within draft Article 3(b) and introduces a pivotal proviso:

“The Directive shall not apply to any of the following… payment transactions from the payer to the payee through a commercial agent authorized to negotiate or conclude the sale or purchase of goods or services on behalf of only the payer or only the payee.”

This conundrum is at the heart of the upcoming PSD2, an iteration of PSD1. This proposed change, which dates back to June 2, 2015, seeks to modify the Commercial Agent Exclusion, significantly restricting its scope. It limits the exclusion to payment transactions initiated by the payer and aimed solely towards the payee. Such transactions must be carried out solely through a commercial representative who has been expressly authorized to negotiate or consummate the sale or purchase of goods or services on behalf of either the payer or the payee. This amendment is explained in draft Article 3(b) and includes a critical provision:

“The variation in the implementation of the payment transactions exemption, as specified in Directive 2007/64/EC, is conspicuous across different Member States. Some states permit e-commerce platforms, serving as intermediaries for individual buyers and sellers, to avail themselves of this exemption, even when there is an evident dearth of substantial negotiation or transaction conclusion margins. This extends beyond the intended purview of the exemption, heightening potential risks to consumers, as these service providers operate outside the protective aegis of the legal framework. Furthermore, these incongruous application practices have the potential to distort the competitive dynamics within the payment market.”

• In response to these apprehensions, a clarifying directive is mandated, stipulating that the exemption’s applicability hinges on agents acting exclusively on behalf of either the payer or the payee, irrespective of their custodial responsibilities concerning clients’ funds. In cases where agents represent both the payer and the payee, a practice observed in certain e-commerce platforms, the granting of exemption status is contingent upon their refraining from custodianship of clients’ funds at any point.
• The reference to the misuse of the commercial agent exclusion by e-commerce platforms in the aforementioned recital implies that such operators should not fully exploit this exemption, particularly when they do not generate a significant margin through negotiations or transaction completion.
• Evidently, the pivotal criterion of a “real margin” has become central in determining eligibility for the exemption. Unfortunately, this criterion remains conspicuously absent within the language of the draft revised exclusion itself, leading to a palpable sense of ambiguity regarding the precise qualifications for eligibility. This uncertainty prompts questions about whether a typical e-commerce marketplace provider can avail itself of this exemption without completely refraining from managing client funds.

The approach taken by PSD2 raises numerous unanswered questions and, somewhat disconcertingly, may not effectively foster innovation in this domain. There is a fervent hope within the industry that the precise scope and parameters of the commercial agent exclusion will be definitively delineated as PSD2 is integrated into the legislative framework of individual EU Member States, supported by regulatory guidance. This clarity is much needed to effectively navigate this intricate landscape.