As large businesses across Europe adopted Vendor Management Systems like SAP Fieldglass and outsourced their contingent worker programs to Managed Service Providers (MSPs), the landscape began to shift. This shift has brought about significant changes in how these organizations operate, particularly in the realm of financial transactions and compliance.
MSPs started looking more like financial institutions, handling payments from buyers to suppliers. This transformation brought them under the scope of the EU's Payment Services Directive (PSD) and PSD2, which required registration, minimum capital requirements, and safeguards for suppliers. The PSD2 directive, in particular, has been a game-changer, introducing stringent requirements to enhance security and transparency in payment services.
At FaaST Solutions, we've always seen the risks in this setup. The complexities of compliance can be daunting, especially for MSPs that are not traditionally financial institutions (very few if any are). Historically we have seen multiple MSP fold as they struggled to manage the cashflow or to uphold the guardrails that protected the payee's money
How did UK MSPs implement these directives? At the recent CWS Summit in London, we sensed some confusion and inconsistency. What have you observed in the UK market?
One of the key challenges has been ensuring that all transactions are secure and compliant with PSD2 regulations. This includes implementing strong customer authentication (SCA) and ensuring that all payment processes are transparent and traceable.
PSD also meant the following:
Application for Authorisation with the overseeing local authority
Minimum operating capital requirements,
Guardrails to ensure that payees money is safe and can only be used for paying the suppliers
For more details see: https://www.eba.europa.eu/regulation-and-policy/single-rulebook/interactive-single-rulebook/14575
And yes these directives also got implemented in the UK before leaving the EU.
With FaaST Flex, we've built a PSD2-compliant Pay Agent that also offers invoice financing. Our solution not only ensures compliance with the latest regulations but also provides additional benefits such as improved cash flow and reduced administrative burden. Ready to mitigate risks and streamline payments? Let's talk!
In conclusion, the adoption of PSD2 by MSPs is a critical step towards ensuring the security and efficiency of financial transactions in the contingent labor market. However, it also presents significant challenges that need to be addressed. At FaaST Solutions, we are committed to helping our clients navigate these challenges and achieve compliance with ease.
#ContingentLabor #MSP #PSD2 #VendorManagement #FaaSTSolutions