DSTI/ICCP/IIS(2003)17
MEASURING E-COMMERCE IN THE FINANCIAL SECTOR
Introduction
1.This paper provides some background information on OECD work on defining and measuring e-commerce and presents a progress report on more recent work by the OECD and Eurostat in applying the definitions to the financial sector.
Background: OECD work on defining and measuring e-commerce
2.Following a recommendation made by Ministers at the 1998 conference on Electronic commerce, the OECD’s Working Party on Indicators for the Information Society (WPIIS) established an Expert Group on “Defining and Measuring E-commerce”. The aim of the Expert group was to “compile definitions of electronic commerce which are policy relevant and statistically feasible”.
3.Subsequent work by the Expert Group resulted in definitions for:
electronic commerce transactions
electronic commerce business processes
Internet commerce transactions
Internet commerce business processes.
4.These were presented to the April 2000 WPIIS meeting which agreed to proceed with the two transactions-based definitions and leave the business process definitions for later consideration. The broad transaction definition covers electronic commerce transactions generally, while the narrow version deals only with Internet commerce transactions.
5.The broad definition is:
“An electronic transaction is the sale or purchase of goods or services, whether between businesses, households, individuals, governments, and other public or private organisations, conducted over computer-mediated networks. The goods and services are ordered over those networks, but the payment and the ultimate delivery of the good or service may be conducted on or off-line.”
6.The narrow version (which is a subset of the broad version) is:
“An Internet transaction is the sale or purchase of goods or services, whether between businesses, households, individuals, governments, and other public or private organisations, conducted over the Internet. The goods and services are ordered over the Internet, but the payment and the ultimate delivery of the good or service may be conducted on or off-line.”
Work on the financial sector
7.In 2001, a model questionnaire on the use of ICT/E-commerce in the business sector was agreed by WPIIS. The questionnaire was not sector-specific and experiences by some member countries have suggested that there are difficulties in applying the questionnaire to the financial sector.
8.In recognition of those difficulties, WPIIS has started looking atthe financial sector more closely. Particular emphasis has been placed on the narrow definition presented above, that is, measurement of Internet commerce transactions.
9.This progress report covers that work, in particular:
The deliberations of a joint OECD/Eurostat Expert Group on Measuring Electronic Financial Transactions.
Concurrent work by the OECD in surveying country measurement practices in this area; and,
More recent work by Eurostat on developing a questionnaire for measuring use of ICT/Ecommerce in the financial sector.
Establishment and findings of the Expert Group
10.An Expert Group was established at the April 2002 meeting of the WPIIS after measurement of e-commerce in the financial sector was given a high priority by members of the WPIIS (and, in particular, its Expert Group on Defining and Measuring and Electronic Commerce).
11.The new Expert Group was co-chaired by Mr. Tony Clayton of the UK Office of National Statistics and Ms. Fabiola Riccardini of the National Statistical Institute of Italy (ISTAT). It met in March 2003 and reported its work to the May 2003 meeting of the WPIIS[DSTI/ICCP/IIS(2003)4]. The report covered:
Experiences in measuring (mainly Internet-based) electronic transactions in the financial sector.
Deciding how to best define and measure incomefrom providing financial services electronically (mainly through the Internet).
Deciding on the most appropriate volume measures (again, with an emphasis on the Internet).
Reviewing the general measurement of ICT usage/adoption by the financial sector.
Categorisation of financial sector businesses based on the nature of their business; and,
Categorisation of the e-business functions of financial sector businesses.
12.The report did not attempt to answer the many questions implied by the set of topics listed above. However, it discussed a number of measurement issues and suggested areas where the OECD and Eurostat questionnaires of ICT use/E-commerce should be changed to improve their measurement of the financial sector.
A summary of issues covered by the report
13.The Expert Group concluded that many of the 'categorical' questions in ICT use covered by existing OECD/Eurostat questionnaires were broadly acceptable for use in the financial sector. The key difficulties were seen to arise in the questions designed to assess value or activity relating to electronic transactions by financial sector businesses.
14.The main measurement problems focussed on were the volume and value of financial services activity which is concluded electronically. Particular issues identified were:
Identifying and defining income associated with e-commerce activity.
The difficulty in separating e-commerce (purchases and sales of services) from other transactions and payments; and,
The problem of deciding whether electronic service delivery which has no direct income associated with it should also be measured.
15.An important contribution to the debate on Eurostat's proposals, from ISTAT, was the observation that the main areas of transformation (and the main policy interest) is in the degree to which the Internet permits systems to be opened up and accessed by others. It was therefore argued that measurement should focus on transactions and service delivery over the Internet, with less emphasis on older closed networks.
16.The Expert Group’s view of how to estimate volume and value was based on the assessment that many firms would be unable to separate the value of Internet services sold from their general mix of business. They therefore defined three possible types of measures in ascending order of difficulty:
- Activity measured through the number of Internet customers (as all firms should know how many of their clients have Internet based accounts or secure links).
- Activity measured through transactions/interactions via the Internet, which could be counted and compared with paper/face to face/telephone/'closed' system interactions; and,
- Value measured through the income from Internet based transactions (where income based measures should be those interest margins, fees, commissions, premiums etc which are attributable to Internet transactions).
17.The concept of e-commerce transactions covers both purchases and sales. In relation to the former, for the financial sector, the Expert Group concluded that measurement should ideally distinguish e-procurement (of office supplies, data processing services etc), input of products sold on commission and inputs of financial instruments where the financial institution takes ownership.
18.The Group also suggested that consideration be given to defining categories of financial sector businesses, based on the nature of their business, for instance:
Account management and payment systems (i.e.retail banking and cards) which usually also act as retailing systems to sell other functionally different products;
Risk sharing service providers (insurance/reinsurance where the risk is spread to other companies);
Savings and loans providers (mortgage and other lenders, investment trusts/managers);
Distributors/retailers of financial products, who take no risk, only commission (brokers); and,
Distributors who do hold stocks/bonds, and therefore carry risk.
19.Relevant business processes were not identified in any detail in the Expert Group’s report but it was agreed that they are likely to be different for financial institutions. It was suggested that further work in this area would require industry advice.
20.Other areas covered by the OECD and Eurostat questionnaires of ICT use/E-commerce include IT security, reasons for Internet selling, use of particular networks other than the Internet and confidence-building practices. It was suggested that industry advice would be required to tailor questions on these topics for the financial sector.
WPIIS reaction to the paper
21.Following discussion at the May 2003 meeting of WPIIS, a view emerged that the existing OECD and Eurostat questionnaires (of ICT use/E-commerce) could be used for the financial sector with some adjustment.
Country experiences in measuring electronic transactions in the financial sector
22.A metadata questionnaire on the methodology used to measure electronic transactions in the financial sector was sent to WPIIS delegates in March 2003 (to update the results of an exercise carried out the year before). Results were presented to the May 2003 meeting [DSTI/ICCP/IIS/RD(2003)3].
23.Some countries reported that they did not treat the financial sector differently from other sectors and had no difficulty in obtaining estimates of the value of e-commerce transactions. Other countries have had difficulties for various reasons including reporting problems relating to identification of income from electronic transactions. In respect of income measured, some countries specified that only premiums, fees and commissions attributable to electronic transactions be included, while others also included interest margins. Many countries did not specify particular income inclusions, relying on the standard e-commerce value question (which seeks the valueof electronic sales and/or its share of turnover). Italy has carried out various collections of the financial sector and has reported that the critical issue relates to definitions, in particular for e-commerce. A new initiative is currently underway between ISTAT and the Bank of Italy to survey banks using a purpose designed questionnaire, which among other things will collect the value of transactions from e-commerce by type of service. The ISTAT questionnaire on ICT use/E-commerce also asks financial-sector specific questions on services offered via Web sites.
Eurostat work
24.Eurostat has established a task force on e-finance, which is expected to intensify its efforts and take on much of the developmental work on measurement of e-commerce in the financial sector. More recently, Eurostat has developed a draft questionnaire for a pilot survey of financial institutions to be conducted in 2004. The survey will form part of the 2004 Community survey of ICT usage but has been tailored for the financial sector, which for the purposes of this exercise includes the following NACE J industries:
6512 Other monetary intermediation
6522 Other credit granting
6601 Life Insurance
6603 Non-life insurance.
25.A draft of the pilot questionnaire is attached as the Annex. Member States of the European Community, EEA and Candidate Countries will discuss it at the biannual meeting of the Working Party on "Statistics on Information Society", Luxembourg 14-16 October 2003.
Next steps
26.Eurostat and its Task Force on E-finance will take the lead on development of measures of ICT use and e-commerce in the financial sector, with the results of the 2004 pilot survey being of particular interest.
27.Eurostat and OECD will continue to work together on user requirements and conceptual issues, with Eurostat expected to take a more prominent role. An opportunity to explore these areas with policy and industry experts may present itself later this year, with a planned workshop of the (now merged) three Expert Groups of the WPIIS. The workshop would generally cover the area of e-business and, while the agenda has not been finalised yet, it is likely to include some consideration of financial sector e-commerce measurement.
Issues for consideration by members of the Working Party on Financial Statistics
28.Input to this work by members of the Working Party on Financial Statistics would be welcomed. Comments are particularly sought on:
The Expert Group’s work. Did the Expert Group identify the most important measurement issues relating to e-commerce (and, in particular, Internet commerce) in the financial sector? Is the definition of e-commerce income as “interest margins, fees, commissions, premiums etc which are attributable to e-commerce transactions” reasonable?
The draft Eurostat questionnaire. Are the activity and value questions in Modules C and D(see Annex) of the Eurostat pilot questionnaire appropriate? Are the concepts and classifications used correct? Does the Group have views on the likely availability of the data requested?
29.Comments provided after the meeting are welcomed and should be directed to Hartmut Buchow (Eurostat) or Sheridan Roberts (DSTI/EAS).
ANNEX–DRAFT EUROSTAT QUESTIONNAIRE
This draft has been proposed by Eurostat to the Member States of the European Community, EEA and Candidate Countries for a pilot study in 2004.
Draft Community Pilot Survey on ICT usage of selected NACE J enterprises 2004 (Version of 11 Sept. 2003, draft 03)
General outline of the survey
Sampling unit:NACE sections 65.12, 65.22; 66 except for 66.02; the pilot study should limit scope to insurance and credit institutions and retailers / brokers of their products, including 'virtual' banks or brokers
Survey period:First quarter 2004
Reference period:Year 2003 where specified, January 2004 for the other data
Questions to be included:At least the non-optional questions included in the enclosed Eurostat proposal.Questions relating to eEurope 2005 benchmarking indicators (all mandatory) are marked with an asterisk (*). Member States can include additional questions.
Layout of questionnaire:The layout of the questionnaire is up to the contracting country. However, countries should follow the order of the list of variable enclosed, if possible. The economic background data should be placed at the end of the questionnaire. Every effort should be made to obtain them from the most recent SBS survey.
Sampling frame: The Community Structural Business Statistics (SBS) enquiry should provide the sampling frame in order to estimate the total value of ecommerce for the sectors surveyed. Contracting countries may decide to add a question on total volume of orders or turnover if this is needed to estimate the total value of e-commerce for the sectors surveyed. The latest available data collected by the SBS would be acceptable for grossing up in order to avoid asking enterprises for turnover data which might not be ready for release yet.
Sample size, stratification:The survey should provide representative results at a level of two digit aggregates.
NACE breakdown for
Pilot Survey on ICT usage
of selected NACE J
enterprises 2004:Unit: enterprise; all variables; data should be provided in tabulated form:
Aggregation of NACE subsections or two digits: none1. / 65
2. / 66
Size class breakdown:Unit: enterprise; level of activity breakdown: the aggregate of the 2 NACE aggregates mentioned above; all variables):
Persons employed:
Obligatory:10-49 (small enterprises)
50- 249 (medium enterprises)
250+ (large enterprises)
10+
Optional: 1-4
5-9
NACE subsections and enterprise size classes are not required to be cross-tabulated.
The sample size should be appropriate for obtaining representative results.
Countries should aim at a minimum response rate of 50%.
Geographic breakdown:Unit: enterprise;
Activity level breakdown: aggregate of all mandatory NACE aggregates [1. and 2. above];
All variables;
Size class: aggregate of 10-249 persons employed (small and medium enterprises);
Geographic breakdown: objective 1, non-objective 1.
Production value: The production value is the sum of all the items related to the services produced by the credit institutions (excluding direct investments and capital gains). This variable is calculated as follows: Interest receivable and similar income less Interest payable and similar charges plus Commissions receivable plus Income from shares and other variable-yield securities plus Net profit or net loss on financial operations plus Other operating income (Methodology for business statistics, methodological manual for statistics on credit institutions Version 1.9. June 2003, Eurostat, Code 12120)
Weighting of results:Results should in general be weighted by number of enterprises.
Turnover weighting should be in addition used for turnover related question D3
Employment weighting should be applied in addition to enterprise weighting for question A2, A3
Data transmission:For each variable, data should be given by the NACE aggregates mentioned above and, in addition, by the enterprise size classes referred to above.
For the quantitative sales and orders variables, estimates should be made for the total value of sales and orders for the economic sectors and size classes sample. Results should be sent to Eurostat in the format of the tabulation scheme provided by Eurostat. If possible, data should be provided in the third quarter 2004 and at the latest by 15 October 2004.
Reporting of results to Eurostat
The following reports should be provided to Eurostat, in English except where otherwise specified
Before sending out the questionnaires
Inception reportQuestionnaire in national language (in computer readable form), and, if available, in English. Interviewer instructions. Timetable for survey, sample design, stratification, sampling universe, sample size, survey type, scope (NACE, enterprise size classes). If survey is embedded in another survey vehicle, please indicate where it is inserted.
Pretesting scheme; results of pretests, if used.
2 months after carrying out survey
Interim reportResponse rates, problems encountered with survey, first lessons to be learnt. Calendar for data release.
4 months after carrying out survey
Tabulated dataSubmission of data in tabulated, computer readable form to Eurostat according tabulation scheme provided by Eurostat.
6 months after carrying out survey
Final reportFinal methodological report (at least 10 pages)
Questionnaire in national language (in computer readable form), and, if available, in English. Report should follow Eurostat model (to be developed) but should include gross/net sample size, sample design, stratification, sample representativity, sampling frame, survey type, scope (NACE, enterprise size classes). Response rates, confidence levels, data treatment: (weighting, grossing up)
Analytical reportReport presenting key results of the survey (tables, graphs and text, at least 10 pages)
Draft Questionnaire for Eurostat pilot survey on ICT Usage 2004
of selected NACE J enterprises: NACE 65.12, 65.22; 66 except for 66.02 Version 03/030911)
(Optional)