Discover how merchants can capitalize on the European Union’s Digital Markets Act (DMA) by exploring new payment processing options, developing independent payment systems, and partnering with innovative providers.

The European Union’s Digital Markets Act (DMA) is a groundbreaking law designed to promote fair competition and reduce the dominance of major tech companies known as “digital gatekeepers” in the online market. (Companies must have at least 45 million monthly active users in the EU and significant economic influence to qualify as gatekeepers). It introduces new rules and obligations these large platforms must follow to ensure fairness and openness. The DMA specifically targets tech giants such as Google, Amazon, Apple, Meta, Microsoft, and ByteDance, which provide essential services like search engines, app stores, social media platforms, and online marketplaces. 

This article explores the new directive, focusing on opportunities for merchants due to the increased competition among platforms and the broader implications for different sectors.

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Payment Processing and Merchant Options

The European Union’s Digital Markets Act (DMA) is set to have a significant impact on payment processing and merchant options within the EU. Here are the key points:

1. Opening Up Payment Processor Options

The DMA mandates major tech “gatekeepers” such as Apple, Google, Amazon, and others to enable third-party payment service providers on their platforms and app stores. This policy creates new opportunities for merchants, allowing them to opt for alternative payment processors beyond the gatekeepers’ native systems like Apple Pay or Google Pay. Merchants can now assess and choose payment providers based on criteria such as acceptance rates, costs, and settlement times, enhancing their ability to optimise payment strategies. For example, this means a potential reduction in the costs associated with digital sales, as merchants no longer need to pay the substantial commissions that gatekeepers typically charge.

2. Enabling New In-store Payment Methods

The shift encouraged by the DMA could also widen the range of payment processing options available to merchants. Gatekeepers are now required to permit users to set third-party apps as default for contactless payments using NFC technology, allowing consumers to use digital wallets like PayPal, banking apps, or other fintech services at physical retail stores instead of just credit/debit cards. 

This change enables retailers to accept faster, more secure, and potentially lower-cost payment alternatives to traditional card networks for in-store transactions. Furthermore, merchants gain the ability to bypass traditional app stores, exploring alternative payment providers that may offer lower fees and better terms, which can improve profit margins and enhance customer experiences by supporting a broader range of payment methods.

3. Facilitating Integrated Loyalty Programmes

By requiring data portability and service interoperability, the DMA allows retailers to integrate loyalty programmes across different digital platforms and payment methods. Consumers can accumulate and redeem rewards seamlessly through their preferred digital wallet or payment app when making purchases, enhancing engagement.

4. Promoting Secure Third-Party Payment Options

Under the DMA, gatekeepers must permit third-party payment service providers on their platforms and app stores. This allows merchants and consumers to select alternative payment processors that focus on strong security measures like advanced encryption, fraud detection, and secure authentication protocols. The resulting competition in the payment space drives providers to enhance their security standards to attract and keep customers.

How the DMA Impacts High-Opportunity Industries

Industries such as online gaming, content creator platforms, and online trading have traditionally faced high fees and limited options from online marketplaces and platforms. Here’s how the DMA could impact these industries. 

Online Gaming and the Creator Economy

The DMA’s push for an open digital market could particularly benefit sectors like online gaming and the creator economy. These industries often face high take rates and restrictive policies from major platforms, which can stifle growth and innovation. By leveraging alternative marketplaces, gaming companies and creators can offer their products directly to consumers without hefty fees, fostering a more sustainable economic environment for developers and content creators alike.

Online Trading Services

Similarly, online trading platforms can benefit from the DMA. These services, which include financial trading and cryptocurrencies, often encounter barriers due to the stringent policies of traditional app marketplaces. The ability to operate through alternative platforms could not only decrease costs but also increase the speed and reliability of transactions, appealing to a broader customer base.

Strategic Considerations for Merchant Success

Merchants need to adapt to the new opportunities and challenges presented by the DMA. Here are three key takeaways for leveraging these changes effectively:

  • Evaluate New Marketplace Opportunities: Assess new marketplaces and payment processing options emerging from the DMA. Consider the security, reach, and customer service of potential partners to ensure they meet your business’s operational needs and customer expectations.
  • Develop Independent Payment Systems: For those with the resources, developing independent payment systems can be a strategic move. This approach allows businesses to control the entire payment process, reduce reliance on external platforms, and directly manage security, data privacy, and customer experience.
  • Partner with Innovative Payment Providers: Explore partnerships with innovative payment providers to diversify payment options and enhance the customer checkout experience. Providers that support a variety of payment methods, including ewallets, cryptocurrencies, and localized payment systems, will help businesses more effectively cater to a global audience.

The DMA marks a significant move towards a more open and competitive digital market in Europe, presenting numerous opportunities for merchants across various industries. By adapting to these changes, businesses can not only ensure compliance but also position themselves to take full advantage of a more diverse and equitable digital economy. 

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