If you offer payment services and want to ensure your organisation is meeting compliance requirements, understanding payment regulations and how to implement them accurately is key.
Official data shows there are currently around 86,140 financial businesses operating across the UK. As these enterprises grow, it’s essential to develop a deeper knowledge of PSD2 regulations and the Payment Services Regulation 2017 legislation.
This may seem complex at first glance, but getting to grips with FCA and PSD2 regulations can help your organisation enhance its provision with strong compliance alignment. This helps to build consumer confidence in your solutions to create trust and a more authentic brand reputation.
Contents
- Who is the FCA?
- What are FCA and PSD2 regulations?
- How do FCA and PSD2 regulations impact Direct Debit payments?
- Ensure ongoing compliance with Interbacs payment services.
Who is the FCA?
The Financial Conduct Authority (FCA) is the UK’s independent financial services regulator with a remit to support efficiency within the markets and protect consumer rights. The FCA’s key responsibilities include:
- Consumer protection: the FCA organises and enforces consumer protection throughout the financial services industry.
- Regulation management: this body regulates financial company conduct and oversees the financial trading market infrastructure.
- Organisation authorisation: the FCA authorises firms and individuals to operate financial services and offer consumer credit.
- Sector enforcement: if organisations don’t meet approved standards, the FCA can take action.
- Direct Debit agreements: the FCA requires that all Direct Debit agreement information is clearly communicated to the customer. Direct Debit mandate forms have to be agreed and signed by the customer in order to set up a Direct Debit.
What are FCA and PSD2 regulations?
The FCA is important to all UK financial organisations and enterprises as the industry regulator. However, the payment processor also has a vital role to play in maintaining compliance and ensuring Bacs rules are effectively met.
These Bacs rules include making sure that an advance notice is sent when a new Direct Debit is set up. Payment processing firms should also conduct Know Your Customer (KYC) when signing new payees. This includes verifying a new customer’s identity and bank account details before setting up Direct Debit payments.
Why is all this important for businesses handling customer payments? Payment processing services should be transparent and protect customers by having the consumer at the core of all processes. Meeting high standards ensures that data is handled and stored correctly according to compliance regulations.
The Payment Services Regulations 2017 (PSRs 2017) provide a legal structure for payment services. These rules administer the EU’s PSD2 regulations within the UK and support fair competition, security, digitisation and progress in the payments services space.
PSRs oversee financial services activities, such as:
- Initiating payments on behalf of a customer
- Running online payments or wallets
- Processing credit and debit card payments
Although some of the Payment Services Regulations 2017 are not directly applicable to Direct Debits, they do have influence over the internal payment ecosystems of most businesses, so alignment is important.
How do FCA and PSD2 regulations impact Direct Debit payments?
FCA regulations impact Direct Debit payment management through a variety of methods, including:
The Direct Debit Guarantee
The Direct Debit Guarantee is crucial as it provides customers with the ability to gain a full refund for any unauthorised or inaccurate payments from their bank.
Third party oversight
FCA has introduced frameworks which require all Direct Debit bureaus to register as regulated payment institutions. This ensures customer complaints are addressed and that safeguarding standards are upheld.
Fair Value
According to the FCA’s Consumer Duty, businesses that are collecting Direct Debit payments must ensure that the payment method is suitable for its target market with clear communication and available support for vulnerable consumers.
PSD2 regulations and Direct Debit impact
PSD2 regulations aim to enhance the security of electronic payments and impact Direct Debit payment processing services with:
Strong Customer Authentication (SCA) exemption
SCA typically involves multifactor authentication for digital payments, these can include SMS, Email, Push notification via applications, biometrics and dual signatory for businesses
Increased fraud monitoring
Payment service providers must have robust, high-standard security and fraud detection capabilities. Any fraud incidents should be reported to the FCA.
Ensure ongoing compliance with Interbacs payment services
Maintaining regulatory compliance supports businesses that handle payment processing to be transparent in data collection and reporting while implementing resilient security measures.
To find out more information, read our Bacs compliance and security explained: the complete business guide.
At Interbacs, we offer a flexible and comprehensive service as one of the first Bacs approved Direct Debit Facility Management companies. Being a Bacs accredited solution specialist allows us to create a smooth and efficient experience for our clients.
Our years of experience enable us to deliver highly reliable day-to-day advice and support regarding payment services and processing. This means we provide the highest-quality Bacs payment solutions, ensuring positive ongoing relationships and superior support.
Whatever Bacs solution you need for your business, we can help you get it up and running successfully in no time.
Why not explore our Bacs Approved Software to find out how we can support you in growing your business.
Contact our friendly expert team for advice and more information.
