Visa Europe held their 2nd annual Acceptance Risk Forum at the end of November and I was honored to represent Credorax at this important gathering. The Acceptance Risk Forum is an industry event for key players from across the industry to discuss risk acceptance matters in addition to helping Visa improve the quality of its Visa Merchant Alert Service (VMAS).

There were representatives from established third party service providers, PSPs, PFs and acquirers as well as a number of representatives (including C level personnel) from Visa present at the forum. Speakers from these organizations as well as regulators and third party providers were selected to present a topic for panel discussions with Q&A time at the end of each. Among the major players present at the meeting were Google, WorldPay, First Data and Barclays.

Representatives of Credorax partners such as Segpay, Axcess, Nochex and Skrill were also in attendance.

Forum Overview

The forum was held over 2 days and focused on the following 3 issues facing the payments industry:

  • Third Party Risks: The industry needs to learn how to manage new players such as cyberlockers and indirect payment mechanisms in order to protect brand and reputation.
  • Acceptance Risks: These include the possibility of merchants processing illegal or prohibited transactions
  • Industry Unity: The need for the entire payments industry to unite in its fight against criminals.

There were a wide range of topics discussed during seminars held over the 2 days that addressed these issues, including: acceptance risk fundamentals, new criminal tactics and organization, new technologies and business models, onboarding red flags, acceptance risk case studies, new regulation in Europe and the challenges of a borderless business.

Binary Options: An Acceptance Risk Case Study

Credorax hosted a session on the second day to discuss Acceptance Risk Case Studies, where we demonstrated how to manage risk when it comes to “grey area” businesses such as Binary Options which are not regulated uniformly across the board.

The European Commission confirmed that Binary Options fall within the definition of “fi
nancial instruments” under MIFID (Markets in Financial Instruments Directive). One of the implications of this directive is that Binary Options firms are required to obtain a financial institution license. Once the merchant obtains a license within one of the EEA jurisdictions, he would be able to avail himself of the passporting option.

When it comes to licenses, the jurisdiction where the merchant is registered and operating from as well as the jurisdictions to which the service is being offered are important factors. The merchant needs to be able to legally provide binary options services to multiple jurisdictions. The passporting allowance under MIFID makes this a simple process.

Passporting is used to avoid the trouble of going through the licensing process in each jurisdiction he wants to service. Once the merchant obtains his license from the jurisdiction of registration and a short form is filled in with the local authority as a request for the ability to offer services to other jurisdictions within the EEA. This is a quick and easy process which allows financial businesses such as binary options to fully comply with MFID. However this is only true for firms licensed under a Financial Services regulator and would not be possible for firms with a gambling license.

Conclusion

We were thrilled to participate in this year’s Visa Acceptance Risk Forum and provide valuable insights on the acceptance risk in the Binary Options industry to our colleagues.We look forward to next year’s meeting.