The Payout Flow That Needed A License

How $100M+ a year in European payouts ended up in a structure PSD2 no longer allowed, and what fixed it

In 2023, when I was on the provider side, a global print and design company came to me with a compliance problem in Europe. Nothing was visibly broken. Payouts went out on time and partners got paid. The problem was the structure underneath, and it covered more than $100M a year in payouts.

What Was Happening

The company collected payments from customers in Europe into its own account. Out of that same pot of money, it paid the designers and partners who did the work. One account, doing two jobs: money in from customers, money out to third parties.

That setup is common. It's simple to run, it's how a lot of platforms start, and for years it was widely treated as fine.

Why It Was A Problem

Under European payment rules, receiving money from one party and passing it on to another is generally a regulated payment service, which requires a license unless an exclusion applies.

The exclusion many platforms relied on is the "commercial agent" exclusion: the idea that the platform is simply acting as an agent for the seller, so the buyer is really paying the seller. Under the original Payment Services Directive, regulators in different countries read that exclusion differently, and some let a platform act for both buyer and seller.

PSD2, which took effect in January 2018, closed that gap. The commercial agent exclusion now only applies when the business acts for either the payer or the payee, not both. A platform that collects from customers and pays out partners from its own account is usually acting for both sides.

In plain terms: when the money comes in and goes back out through your own account, you can end up operating as an unlicensed payments company without ever deciding to become one.

How We Fixed It

The answer wasn't for the company to apply for its own payment license. That's a heavy lift, and it only makes sense at a scale and with a team built for it.

Instead, the payout side moved to a licensed provider. A regulated entity handled the third-party funds and paid the designers and partners, so the company was no longer the one holding and passing on money owed to someone else. We moved the volume over, and the structure was compliant.

How To Check Your Own Setup

Follow the money. Draw the path from your customer's payment to your partner's bank account. If it lands in an account you control before it goes back out, that's the point to look at.

Ask who you act for. If you're effectively working for both the buyer and the seller in the same transaction, the commercial agent exclusion probably doesn't cover you in Europe.

Check your providers' licenses, not just their coverage. A payout provider's country list tells you where money can go. Its licensing tells you whether the structure holds up.

Watch what's coming. PSD2's replacement, the new EU Payment Services Regulation that comes alongside PSD3, tightens the exclusion further. On top of acting for only one side, the agent will need real authority to negotiate or conclude the sale. Whether the platform holds the funds won't matter. The new rules aren't expected to apply until around 2028, but a setup that's borderline today won't get easier.

Don't assume it's only a European issue. The US has its own version of the question through money transmitter licensing, with different rules and exemptions.

The Takeaway

Most companies choose a payout provider on cost and country coverage. In this case, the question that actually carried the risk was simpler: whose account is the money passing through? If the answer is yours, it's worth checking before a regulator or a bank asks first.