A new European regulatory framework
Adopted since October 2020 and applicable from November 2021, this new regulatory framework aims to harmonize and modernize all rules for European crowdfunding platforms. This applies to both Crowdfunding Intermediaries (IFP) and Participatory Investment Advisors (CIP), since this new regime effectively unifies these two statuses.
Given the complexity of preparing applications, all crowdfunding platforms have been granted an additional one-year deadline to comply. They therefore have until November 10, 2023, to submit their application for PSFP authorization to the AMF. After this deadline, unauthorised platforms will have to cease their activities.
New requirements expected
Obtaining PSFP accreditation imposes new requirements on crowdfunding platforms, including:
- Compliance with the minimum fundraising amount per project per year, set at €5 million;
- Establishment of systems to manage customer complaints, detect potential conflicts of interest, and monitor external service providers (particularly in the IT and payments sectors);
- Strengthening controls over project leaders to better understand investor profiles.
Obtaining PSFP accreditation: Where do crowdfunding platforms stand?
Less than a month before the reform comes into effect, some platforms still have not been accredited as PSFPs. In a recent report, Financement Participatif France provided the number of platforms that have obtained PSFP accreditation in France. So what’s the status?
- 15 platforms have obtained PSFP status
- 40 platforms are in the process of being accredited
Note: Once the deadline has passed, platforms that have not yet initiated or completed their procedures will still be able to submit their application to the AMF.
3 tips for taking charge of your payment business
The timeframes for obtaining PSFP accreditation are specific: a 25-day completeness analysis period, followed by a 3-month application review period. Here are 3 tips to simplify and speed up the accreditation process:
Tip #1: Becoming a Payment Service Provider or Payment Service Provider Agent
Obtaining PSFP accreditation is subject to several criteria, including the requirement for the platform to be a Payment Service Provider (PSP) in order to deliver payment services, and to segregate and remit funds.
To do so, the applicant has two options:
- Be registered as a Payment Service Provider with the ACPR (French Regulatory Authority for Payments and Payments)
- Use an accredited institution (such as CentralPay), which grants it the right to integrate and distribute regulated payment services on its behalf (Payment Service Provider Agent status)
In addition to supporting its accreditation with the ACPR, CentralPay provides platforms with numerous services:
- Ready-to-use payment infrastructure: they do not need to create or manage a complex and costly transaction processing system.
- Expertise and technical support: They benefit from technical support and contribute to improving payment operations while optimizing their management time.
- Transaction security and compliance: In accordance with current regulations, CentralPay strengthens security in payment acceptance and financial risk management.
Tip #2: Optimize flow patterns
As a PSFP, each crowdfunding platform must establish clear and transparent flow diagrams, providing a comprehensive view of the various flows in order to optimize their flow. In the case of crowdfunding flows, there are four types of flows:
- Pay-in: The investor deposits funds into their own payment account
- Distribution of funds: Movement of funds to a project segregated account, commissions are taken from the various partners (platform, publisher, PSP, etc.)
- Pay-out: If the project is successful, the funds are released and transferred to the project leader’s bank account.
- Refound: In the event that the project fails to succeed, the funds held in the project account are transferred back to the investor’s bank account.
This flow diagram is essential in consolidating a platform’s payment processes. It allows you to identify key elements, determine the start and end times of each transaction, and define the stakeholders involved. Ultimately, the goal is to improve efficiency, quality, and understanding.
Tip #3: Anticipate investor protection
Among the new obligations that crowdfunding platforms must comply with is investor protection. Indeed, EU Regulation 2020/1503 distinguishes between two investor profiles: sophisticated investors and non-sophisticated investors.
This distinction is primarily based on the criterion of knowledge and understanding of the risks associated with the investment in question.
The regulation thus provides specific protection for non-sophisticated investors before they can invest in a project, including:
- A knowledge test;
- A simulation of capacity to bear losses;
- A pre-contractual reflection period;
- A Specific Warning
Upon closer inspection, this new requirement essentially aims to highlight the risks faced by investors. The regulation stipulates that unsophisticated investors will not be able to finance projects with up to €1,000 or 5% of their net worth. This procedure aims to warn them about the risks of investing. Similarly, platforms that have obtained PSFP approval will be required to implement a knowledge test to determine whether the investor has sufficient knowledge about crowdfunding and the potential risks. This test will be repeated every two years to reassess the investor’s experience.
It is therefore important for platforms to prepare and collect all this investor information in advance, in order to save as much time as possible and, more importantly, to comply with AMF requirements and regulations.
With CentralPay, you choose a partner who will support you throughout your accreditation process.
