The P2P sharing economy has revolutionized the way we access products and services. By allowing companies and consumers to deal directly with one another, platforms like Airbnb and Getaround have forged an entirely new business model. It is also a lucrative one, as P2P marketplaces collect a healthy commission on every deal. This model creates certain payment complexities, however. Indeed, payments are one of the most pressing issues facing the industry, significantly impacting business growth.
Recently, I spoke with The Paypers about payment essentials in the sharing economy. Here are some of the highlights of the interview.
Why do you think sharing economy payments are such an issue for merchants?
According to estimates from PwC, the global sharing economy will grow from USD 15 billion in 2013 to USD 335 billion in 2025. That staggering growth is chiefly driven by millennials, who have a mindset that access is the new ownership. Technology enables access and generates trust between peers and that’s what powers the industry.
In the sharing economy, customers are trusting merchants to rent out their property. Any factor that negatively affects that trust loses business. Even a single missed pay-out could turn a client off from offering their flat on Airbnb or their car on RelayRides.
What makes this even trickier is that payments in the sharing economy are complex. You have money coming in that needs to be divided correctly between various accounts in various currencies on various dates. You have regulations like the new Payment Service Directive (PSD2) that will make huge demands on your business. You have lots of competitors vying for the same consumer’s attention. And you have all the normal payment challenges faced by merchants looking to grow internationally, such as offering seamless payments, supporting local payment methods and staying secure.
Speaking from a PSP / acquirer perspective, what are the challenges associated with accepting split payments and how do you mitigate them?
When a merchant needs to split the payment for a transaction between themselves and one or more suppliers, the complications add up fast. Handling the process manually takes time and resources, plus it’s open to a high risk of error. When you are selling internationally, payments need to be converted into each recipient’s correct currency and released in-line with their local financial regulations.
As a PSP, we know this is a headache no merchant wants to deal with. That’s why we developed SlicePay, a tool for simplifying and automating split settlements. All the merchant has to do is tell us which suppliers should be paid, how much, at what time and in which currency and the system takes it from there. With minimum hassle for the merchant, the right funds are directed to the right bank at the right time.
In light of the PSD2 initiative, what can companies in the sharing economy do to maintain their development while staying in-line with the new regulations?
Trying to meet all of the demands of PSD2 could prove very costly and very time consuming for the average sharing economy merchant.
From January 2018 on, any intermediary party handling funds from a seller or a buyer operating in the EU will have to hold a payment institution license. To be granted a license, sharing economy merchants will have to make huge changes to their business, adding several new positions and departments, including a Money Laundering Officer, a Risk Monitoring Officer, an Underwriting Department and an Internal Audit Department, plus putting a cap on bonuses. All of that could cost them up to EUR350,000 and take up to a year and a half to implement.
There is, however, an easier and far less expensive way out. Acapture is already licensed as a payment institution and is fully compliant with PSD2. So, when a merchant uses our solution, we take on the burden of the regulations. The merchant no longer has to concern themselves with changing their processes and can get back to their core business.
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