E-commerce merchants operating outside the Europe region contracting payment service providers via Europe-based payment agents might face a new challenge in the upcoming months due to the new Mastercard’s BRAM update.
The new Mastercard’s BRAM update
The main principle of this new mandate is the stricter interpretation of merchant location requirements. Mastercard is prohibiting the extension of the area of use – wherein practice, an entity described as a payment agent or subsidiary of a legal entity is contracting the payment service provider instead of a website operator located outside of Europe.
Envision an example where a merchant called MC Gambling Limited was licensed in Curacao to facilitate gambling transactions, and the terms and conditions were to state that the agreement with the cardholder was to be governed by the laws of Curacao. In this example, the acquirer’s relationship is with the merchant’s payment agent in Cyprus. As far as Mastercard’s opinion is concerned, the Cyprus-based payment agent is not a merchant in this case. As the last BRAM update explicitly outlines, the merchant in this scenario is the Curacao entity. Only acquirers with an area of use in Curacao would be able to acquire transactions for it.
The main attempt is to regulate gambling operators not licensed within the European region. It is understood that this industry remains layered with complexity, and presumably, the operational costs associated with this change might be significant from now on.
Although the main target of this regulation is the gambling industry, there is a strong probability that Mastercard would intervene in the forex space as well to ensure the appropriate application of its merchant location rules.
Striking a balance between transparency for cardholders and effortless payment processing will be crucial for businesses seeking growth in the forex and gambling industry.
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