Amid Regulatory Changes, Eyes On Europe And China

Welcome to the inaugural issue of the Regulatory Tracker, where from here on out we’ll keep an eye on the rules and regulations that govern who pays what, who pays who, and where, and when.

By now you know that regulations are both boost and bane for payments at large, and for consumers, and the landscape is an ever shifting one, especially against a global backdrop.

For Google, fines loom, as antitrust regulators in the European Union are targeting the firm’s shopping service. The actions may come this summer ahead of regulators taking a summer break, beginning in August.

At issue is whether the internet giant has been skewing search results to point toward that eponymous shopping service. Reuters notes that the investigation has been going on for seven years and comes amid a wave of complaints throughout the U.S. and Europe via rival firms (Amazon and eBay, anyone?).

Regulatory actions may be in the offing, though the extent is unknown. The financial impact may be significant, as Reuters notes, with $9 billion on the hook, as 10 percent of the global top line is a rule of thumb.

Though no fine has been levied, and no remedies have been asked for, it is possible that some changes may be coming to the way Google presents its internet search results for shopping queries. Assuming that at least part of any change might mean taking its own placement down a few notches from the top, the impact might be of benefit to rivals.

Separately, PSD2 is on its way, and yet signals are brewing that some companies may be caught flat-footed for the transition. Studies posted last week by Ping Identity show that a relatively paltry 46 percent of the 144 payment service providers surveyed are ready to hit the ground running with PSD2. Lack of information stands out, as the Ping Identity survey shows that less than half — or 44 percent — of respondents know what they need to do in order to comply with PSD2. And only 35 percent feel they will be able to comply with all the regulations in time.

As readers of this space are well aware, PSD2 is far-reaching in its impact, as it mandates that account servicing payment service providers must, upon being directed so by customers, let third parties connect to their bank accounts and access data.

Separately, but still germane to Europe, Global Trade Review reported that firms also have a “lack of common understanding” of just what lies behind the EU Funds Transfer Regulation 2015, which takes effect later this month. And that lack of understanding, warns Deutsche Bank in its own research, could disrupt the way transactions flow between countries. The regulations stipulated that more information than had been provided previously be attached to funds that are tied to at least one PSP located in the EU, with a focus on stanching money laundering or terrorist financing.

Issues yet to be settled for banks, noted Deutsche, include whether to halt or outright reject transactions that do not carry the required additional information, and whether some situations require additional data verification from PSPs, such as checking names and account numbers. Where there is lack of clarity, warned Deutsche, there lies the possibility for fragmentation in processes, and that means less than optimal fund flow.

Turning regional attention away from Europe and toward China, in a recent note by Citi analysts, small and mid-sized banks are “most at risk” under increased regulatory controls, but the Chinese economy at large will not see much impact. These relatively smaller banks have boosted their balance sheets 43 percent from the first quarter of 2015 to the third quarter of 2016 to roughly $14 trillion, as measured in dollars.

But recent regulatory moves have stated that banks must assess their asset management operations and slow interbank borrowing. Those directives come from the China Banking Regulatory Commission and the China Securities Regulatory Commission.