Submission of Visa Europe on
The European Commission public consultation on the future of electronic commerce in the internal market and the implementation of the Directive on Electronic commerce (2000/31/EC)
Visa Europe[1] welcomes the Commission’s initiative to consult on the subject of e-commerce.
We have not commented on the whole text but have concentrated on the main issues which are of interest for our business. Visa Europe would be happy to provide more detailed comments in due course should these be required by the Commission in the context of any further initiative in the field of electronic commerce.
Question 19: What are your views on the growth of the economic development of electronic commerce and information society services in Europe, in general and compared to its most important competitors?
At the end of the first page of the consultation paper, the Commission consultation document states that “the development of retail electronic commerce remains limited to less than 2% of European total retail trade”. This figure was already cited by the European Commission in the “First Report on the application of Directive 2000/31/EC of the European Parliament and of the Council of 8 June 2000 on certain legal aspects of information society services, in particular electronic commerce, in the Internal Market”[2], published on the 21 November 2003. Furthermore, the European Commission Report on cross-border e-commerce in the EU[3]published in March 2009 states that cross-border e-commerce in Europeis worth €106 billion. Such value, which has as source an eMarketer study from 2007, refers only to western European Union countries; 70% of the figure refers to UK, France and Germany.
Due to its sustained double-digit growth over the last 5-10 years, e-commerce has been a keen area of interest for a wide range of research sources with statistical output being produced on an annual basis. Visa Europe continues to experience significantyear-on-year growth in e-commerce and the Visa Europe’s Cross-Border Acquiring programme - in existence since 1999- certainly supports this growth as it permits the Merchant to select an Acquirer based in any of the Visa Europe markets with relevant expertise and who can provide the best service for their business.
The various research sources provide a wide range of estimates for the value of e-commerce in Europe, with definitions of e-commerce, the overall values, and European coverage ranging from one source to another.
Visa Europe would like to indicate two sources that for breadth, consistency and coverage of markets provide,in our view, a reliable statistical basis with regards to e-commerce. Such sources are Euromonitor and Mintel; although there is variation between the two information sets, both indicate that online retail in the EU is currently in the 2.5-3.5% range of overall retail sales.
According to Euromonitor, the overall EU e-commerce value represents €63 billion in 2009 and equals 2.8% of the overall retail sales for the EU countries.Our comparison of the data provided by Euromonitor from 2004 – 2009 presents the following overall figure for the EU:
Retaile-commerce market size €mn / 2004 / 2005 / 2006 / 2007 / 2008 / 2009Total EU retail e-commerce value / 23,522 / 30,361 / 37,949 / 47,433 / 55,317 / 62,984
Proportion of Total EU Retail / 1.19% / 1.50% / 1.81% / 2.20% / 2.51% / 2.84%
According to Mintel, the overall EU e-commerce value represents € 49.1 billion in 2009 and equals 3.4% of the national retail sales. However, such figures presented in the Mintel Retail Intelligence Report “E-Commerce – Europe”(2010) represent the value of retail e-commerce only for five EU markets – UK, France, Germany, Spain, Italy while defining the e-commerce market as a market including all spending on services like travel, tourism, and consumer finance as well as consumer goods.
We believe that another way to describe the e-commercegrowth inEurope, is to refer to figures on retail sales by channel.The chart below presents the difference in growth rates across retail channels between 2002 and 2007. The chart is based on Euromonitor figures, and shows clearly the disparity in growth experienced by internet retailing in comparison to other retail channels, underling the specificity of the internet retail sector. We would therefore like to highlight to the Commission that it is important to define the growth and progression of e-commerce in relation to the relevant potential market for e-commerce and not in relation to retail in general.
As far as growth of e-commerce and consumers’ confidence in e-commerce are concerned, the “Recession in the EU: its impact on retail trade” newsletter published in November 2009 by Eurostat[4], indicates that whilst the recession had a widespread impact on the EU retail sector, this was not the case for e-commerce.The first part of Figure 4 below shows that there was a range of activities where EU-27 retail sales continued to grow despite the recession. This was particularly the case for sales via mail order and the Internet, where volumes continued to increase each month by around 0.3%. Otherwise, despite a period of decelerating sales growth in 2008, there was nevertheless, an almost uninterrupted pattern of increasing sales of textiles, clothing, footwear and leather, as well as pharmaceuticals, medical supplies, cosmetics and toiletries. These two groupings may be considered as necessities (to clothe and to care for one’s health), while the continued growth in Internet sales may, in part, reflect consumers’ decision to stay at home, rather than spend their leisure time in shops or consumers hoping to find lower prices through on-line shopping. Suchdata certainly imply a certain consumer trust in e-commerce even during recession.
However, as the newsletter further illustrates, the continued growth of retail sales via mail order or the internet was not to be seen in all EU markets, which in our view shows how difficult it is to draw conclusions for e-commerce growth in the EU-27 as a whole, cultural differences creating different approaches towards e-commerce. On page 6 the Report shows that the evolution in the volume of sales via mail order or the Internet varied considerably between countries. Two contrasting examples are given in Figure 6 below, with the evolution of the trend-cycle indices for Spain and the United Kingdom. Aside from rapid growth in the United Kingdom, the Report also indicates that there was considerable expansion in the volume of retail sales via mail order or the Internet in Romania, Poland, the CzechRepublic and Bulgaria.Therefore we believe that the e-commerce reality is complex and it is very difficult to draw firm conclusions at European level on its constitution.
Question 24: Do you have information according to which payment problems (lack of choice in terms of methods of payment, confidentiality issues, refusal of payment cards from another MemberState, etc) would be an obstacle to the development of your electronic commerce activity?
Visa Europe believes that the use of payment cards in itself has opened up channels such as e-commerce while the use of cash allows users to buy only in the physical world. Furthermore, certain products, such as prepaid products, have particularly increased the number of consumers who can engage in e-commerce, working towards financial inclusion.
As far as confidentiality in e-commerce is concerned, the card schemes have together defineda data security standard which sets out the minimum requirements that businesses accepting cards should adopt to preserve the confidentiality and integrity of cardholder data used in card payments in e-commerce. Such Data Security Standard (DSS) is managed through the Payment Card Industry Security Standards Council (PCI SSC) and is applied in order to protect the confidentiality and integrity of a subset of data about their customer that e-retailers may hold. The requirements within the standard, however, are sufficiently general to be potentially applied to other data attributes held by e-businesses. It is of note that in an analysis of data breaches a leading forensic company[5] has reported that 96% of data compromises which breached data confidentiality could have been prevented by putting in place reasonable controls such as PCI DSS.
Furthermore, Visa has recently developed the product Visa CodeSure, a standard chip Visa cardwhich generates highly secure dynamic pass codes by means of an eight-digit alphanumeric display, a button keypad and an inbuilt battery. CodeSure creates a one-time password for a variety of online services. The code is authenticated by the bank
After being tested throughout Europe via pilot programmes, in order to evaluate its benefitsfor consumers, and due to the success of such pilot programmes, Visa CodeSure is now commercially available across Europe. Consumers found the product innovative, secure, convenient and easy to use during the pilot programmes and while 90% said they wanted to use the card for logging into more than online banking, 86% were reassured about the issuing banks’ approach to security.
Question 25. Do high bank charges for accepting payments hinder your online activities and do you think that, at European level, there are sufficient alternative payment schemes without high charges for the retailer?
As a four party payment system Visa Europe doesnot engage in issuing or acquiring Visa cards and is thus not able to comment on this question in detail. As a general remark it should be pointed out thatQuestion 25seems to presuppose that bank charges are 'high' and is also leading by asking whether such charges 'hinder' online activities. The assumption that banks charges are high suggests that an assessment has been carried out which shows that charges are high (presumably in comparison to other charges), but it is not clear that this is the case. The responses tothisquestion must therefore be considered in light of the leading manner in which this question has been asked.
Question 26. Do you experience problems in accepting payments of small amounts due to the high level of bank charges (for instance merchant service charges) or, in general, due to the scarce availability of payment methods which are suitable for this purpose?
As in the response to Question 25 above, the fact that bank charges are ‘high’ is assumed. Furthermore, Question 26 is leading by assuming that the availability of payment methods suitable for usein an e-commerce setting is scarce. From searchesundertaken of just a handful of websites it was possible to find merchants which acceptednumerousforms of paymentandinsome countries there are a wide variety ofpayment methods. Responses to this question must therefore be considered in light of the leading manner in which this question has been asked.
Question 27: Are you aware of statistics or general or sectorial studies at national level on the electronic commerce market and in particular its cross-border aspects? If in the affirmative, which?
Visa Europe would like to refer to the Eurostat news release published on the 19th January 2010 which announced results from a survey conducted at the beginning of 2009 focussing on Information and Communication Technologies (ICT) in enterprises in the EU27 Member States[6]. Although the enterprises in the survey are not exclusively from the retail sector, the results are indicative of the cross-border volumes to be seen across e-commerce.
The survey results show that across the EU-27, 73% of e-commerce turnover was domestic, with a further 19% remaining within the EU27 intra-region, and the remaining 8% of e-commerce turnover being inter-regional outside of the EU-27.
Question 47: Are there specific measures in your MemberState on products (safety devices, checks of compliance with medicine marketing regulations, etc), and/or on internet sites (specific logo indicating legal pharmacies, public register of legal pharmacies, etc) aiming to guarantee that all medicines bought on-line are safe? If so, what are they?
Visa Europe Operating Regulationsprohibit illegal transactions from entering the Visa payment system.
As far as on-line pharmacy is concerned, such illegal transactions include sales of prohibited medications or the sale of prescription medications (i.e. medications which can only be sold with legitimate doctor’s prescription) without a valid prescription. Visa proactively monitors the sale of prohibited and prescription medications to cardholders, looking for instance at prohibited or restricted pharmaceuticals being advertised, where Visa is a payment option listed. If such a transaction is found, the Acquirer is notified.
Visa is currently collaborating with the Organising Committee for Operation PANGEA III which tackles illegal online pharmacies. Operation Pangea has been designed to focus on illegal websites supplying counterfeit and other illicit medical products. Pangea III is intended to follow the successes and lessons gained from Operation PANGEA I (2008) and PANGEA II (2009).Operation PANGEA III consists of co-ordinated action by medicine regulators, police, customs, internet service providers, search engines and payment providers, with a view to disrupting illegal websites offeringsub standard and counterfeit medicine on-line.
The most recent such operation, Operation PANGEA II, conducted in November2009, involved 25 countries and was centrally co-ordinated by INTERPOL. During thisweek of action, 153 illegal websites were taken down globally, 2536 packages ofillegal medicines were seized and 59 people were underinvestigation.
As with the previous operations the objectives of Operation Pangea III are to: safeguard public health; raise public awareness of the risks of buying medicines from illegal websites; seize counterfeit and illegal products and remove them from the market; identify the producers and distributors of counterfeit medical products and the criminal networks supporting them; close down illegal websites; prosecute those responsible where appropriate, and seize their assets; enhance the cooperation amongst agencies combating the illicit trade in counterfeit and illegal medical products.
74. What knowledge do you have of on-line dispute settlement systems (legal and extrajudicial) in your MemberState or in other Member States?
For Visa related e-commerce transactions, disputes are handled via the Visa dispute resolution process which includes the so-called chargeback process.
The chargeback rules and procedures are a dispute resolution process which has been carefully developed by Visa and its Members to handle disputes arising from cross-border but also domestic transactions. The chargeback framework within the Visa operating regulations provides a mechanism through which, for example, the issuer of a Visa card can transfer the liability for a transaction back (Charge back) to the Visa acquirer. The Visa acquirer receiving a chargeback request has the right to dispute its validity, and ultimately Visa resolves any disputes that are not settled directly between Members.
The chargeback rules cover,for example, fraud, goods and services not received or not as described.
Chargebacks are contractual rights and obligations between financial institutions that issue Visa cards and the financial institutions that acquire merchants. These rights and obligations derive from their Visa membership and their exchange of Visa-branded transactions. They give no direct rights to cardholders/consumers and their exercise is optional for issuers. However, the chargeback reasons permitted under Visa’s rules have been adopted to enable issuers of Visa cards to address fundamental consumer concerns of their cardholders.
Visa chargeback rules do not attempt to cover all possible consumer protection laws around the world, although some chargeback provisions do correspond with consumer protection regulation in particular countries. As a private mediation service, the rules must be clearly and consistently defined for every participant, in order to reduce the complexity and cost of operating the dispute resolution process.
For further comments and future consultations, please contact the following Visa Europe (Brussels office) representatives: Peter Moller Jensen (tel. 02 501 08 45; email ), Monica Monaco (tel. 02 501 08 46; email )
Brussels, 15thOctober 2010
[1]Visa Europe is an association of over 4,600 Member Banks. Visa Europe was incorporated as a European-owned and operated organisation on July 2004. This enables greater local control and allows Visa Europe to respond quickly to the specific needs and circumstances of European banks and their customers – retailers and consumers. Visa establishes standards that ensure global interoperability and security and plays a leading role in developing new technologies. While Visa does not have a role to play in issuing cards or signing up (acquiring) merchants, it plays a pivotal role providing the global platforms and systems needed by Members to develop and run profitable card payment businesses.
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