Over 5,000 payment and finance leaders gathered to discuss all things payments at this year’s PAY360 conference at ExCeL London. During the event, The Fintech Times took the time to delve into a new EU initiative that could impact payment service providers (PSPs) across the EU.
The Central Electronic System Of Payment Information (CESOP) was introduced to crack down on VAT fraud and increase the transparency of PSPs. However, the new regulatory regime, which requires PSPs to file and report on cross-border transactions across the EU, could pose significant challenges for firms across the market.
To find out more, we sat down with Clare Hammersley, chief sales officer at regulatory reporting firm ARKK, and Mark McKay, managing director within the indirect tax team at Alvarez and Marsal Tax LLP (A&M), to break down the significance of CESOP, the challenges it could cause PSPs, as well as solutions that can help them ensure compliance.
How could CESOP prove challenging for PSPs?
A fragmented landscape across the EU means that PSPs need to ensure compliance in different ways depending on which countries they need to report to. McKay explained the extent of this issue: “Not only do firms have to register and file in the jurisdiction they are established in and trade from, but they may also have to potentially register and file in all 27 member states.”
Hammersley also discussed the difficulties and complexities of the process for businesses: “A lot of regulatory reports can be fairly straightforward. Once you have a template, you can input data and employ a company to convert it to whichever language is required, and then it gets fired off.
“But with CESOP, the sheer volume of data alone and the way that you need to treat that data can be quite overwhelming for a lot of businesses. Some of the PSPs that we are engaging with have tens, if not hundreds, of millions of transactions that they firstly need to identify and find all of the data points, then they need to treat that data – because everything on there isn’t required – then they need to ensure they split it out into the various member states, convert it into XML and then they need to do the technical wrapping and filing.”
Providing a solution
Recognising that PSPs of all sizes could require support in ensuring CESOP compliance, ARKK and A&M have partnered to ensure firms have the roadmap and software they need.
Hammersley explained: “From ARKK’s perspective, when you have a new regulatory requirement, there’s often a sense of nervousness that exists in the market – trying to understand what exactly they need to do as a business. We work hand in hand with advisors. Mark looks after advice and support for the businesses so they understand what it is they need to do, and that’s where we come in.
“Once they understand what’s required from them, our job is to help them with that process to streamline it and make sure it’s fully transparent, by providing a robust software solution.”
To find out more about the new regulatory reporting regime and how ARKK and A&M are joining forces to help PSPs, watch our interview below.
