Amazon limits virtual accounts with PSP policy
Amazon is launching a Payment Server Prover policy to reduce financial crime by online sellers, meaning merchants will soon only be able to use services from a small select list of providers.
Amazon sellers will only be able to access funds through the Amazon store through official Amazon Payment Service Providers (PSPs). For those using a payment provider that’s not approved after 31 May, there could be a huge delay in receiving funds – and from 15 July, not at all.
From 15 July 2021, Amazon will cease disbursement to sellers using non-participating payment service providers, meaning no more payouts until they add a regular bank account (non-virtual bank account) or sign up with a participating payment service provider.
Currently participating Amazon PSPs include LianLian Pay, NetEase Global Pay, Payoneer, PingPong, WorldFirst, AirWallex, OFX Global Currency Account, iPaylinks, Skyee, and Zhejiang Chouzhou Commercial Bank. More are expected to be added in the future.
According to Amazon, the new PSP policy is to ‘detect, prevent and take actions against potential bad actors [to] protect customers and sellers from fraud and abuse’.
The intention is to reduce financial crime by making it much harder to commit fraud by selling products on Amazon and then fund illegal activities. For example, the Paris bombing was funded by multiple small payments delivered by PayPal.
The general move is to improve transparency and make users feel more confident that the products they are buying via Amazon. Before, financial criminals would have just closed their accounts and reopened a new one with a new virtual bank account after being shut down by Amazon.
Now with limited payment providers approved by the ecommerce giant, providers included can be involved in preventing disreputable merchants from circumventing suspension through a string of virtual bank accounts.
Impact on accountants
With PSP coming into effect, it’s a great opportunity for accountants to make clients aware that these changes are coming into effect and review the payment provider and gateways they are using. This will only be relevant to clients that sell on Amazon.
The practical for accountants will be making sure you get access to clients information just as when the client opens up another banking account.
“We try to encourage clients to give us a secondary user access so we can download things ourselves,” said Ecommerce Accountants found and managing partner Joseph Cox. “If there’s an integration with Xero, we’d ensure we could connect that to Xero, make sure balances are closed and tie off to Xero or nil.”
For most accountants, it will only be a small impact us as clients will simply open another account with an Amazon PSP.
Impact on clients and conversion rates
Clients will have “a little bit of headache because its always a little hassle opening an account,” said Cox. “It will impact their cashflow if they don’t do it because Amazon will start holding their money.”
At the moment, it is unclear the end result will be or how much clients will receive back. Before PSPs, clients could pay their Amazon disbursements back into their account using Amazon’s own conversation rate at the date of disbursement into their native currency.
However, Amazon’s rate “has always been bad, so clients would be losing money on transfers”, said Cox. “Whereas clients using payment providers such as WorldFirst and TransferWise (now Wise) are perhaps closer to 3%, so they are more competitive.”
“So we advise clients to switch to a foreign provider,” he added. “I don’t know if the rates will change for those already using these payment providers but they won‘t be impacted as they’ve been doing it all along.”
However, for clients using Wise, which has had typically offered the best conversion rates for sellers, they’ll now have to switch to an Amazon seller on the PSP list at a reduced exchange rate.
Not already using a PSP?
Clients using payment providers not yet participating are recommended by Amazon to contact their provider to learn about their plan to enrol in our Payment Service Provider program.
If they do not plan to enrol, they are advised to switch to a participating PSP or use a bank account directly issued by a bank by 31 May 2021.
No action is necessary for those using ACCS and are disbursing Amazon store proceeds to a bank account directly issued by a bank or participating PSP.
Already using Amazon approved disbursement solutions?
For those already using payments providers that have been added to Amazon’s PSP scheme, merchants and consumers won’t see any disruption and will benefit from competitive exchange rates.
Most PSPs have launched products, such as World First’s World Account, which allow users to set up international accounts to pay fonts into and then receive more competitive exchange fund to move across to other accounts and convert.
Why have I not seen any information about this?
Amazon is being very sensitive around this issue and has prevented accredited payment providers from publicly speaking about it. Apart from PSPs acknowledging they are pre-PSP, it will only be seen on Amazon FAQs and a few news articles.