Position Paper e-payments 10 Recommendations for a Stronger e-payments Landscape in Europe www.ecommerce-europe.eu
POSITION PAPER 3 Introduction: Ecommerce Europe Ecommerce Europe (www.ecommerce-europe.eu) is the European collective of Merchants organisations and their merchants. Ecommerce Europe represents 4.000+ companies selling products and/or services online to consumers in Europe. Founded by leading national e-commerce associations, its mission is to advance the interests and influence of e-commerce in Europe through advocacy, communication and networking. Ecommerce Europe has installed a Working Group E-Payments to strengthen and communicate European merchants vision and viewpoints regarding e-payments. It is Ecommerce Europe s vision that successful pan-european e-payment methods are a crucial element in future growth of the e-commerce market. Ecommerce Europe aims to transform this vision into actions and initiatives towards a more effective and efficient e-payments landscape in Europe, beneficial for both web merchants and consumers. This Position Paper clarifies our views and concerns on e-payment issues for the years to come and comments on recent regulatory and legislative developments. This paper is a fully revised version of Ecommerce Europe s position paper 2012. This position paper states 10 recommendations for a stronger payment landscape in Europe: Recommendation 1: Move forward with access to the account for third party payment providers duly licensed within the scope of a revised PSD Recommendation 2: Communicate adequately to educate both consumers and merchants about the possibilities and conditions for this new class of payment initiation instrument Recommendation 3: We ask European authorities to provide a structure for contractual and technical arrangements to assure legal clarity and technical scalability of third party services Recommendation 4: Merchants welcome solutions that re-use existing authentication methods to improve security, protect users privacy and streamline user experience Recommendation 5: Improve the user experience of 3D Secure and harmonise where possible. A user experience that is familiar, consistent (e.g. by reusing existing authentication methods) and does not contain unnecessary steps in the check-out process, would improve the conversion of 3D Secure Recommendation 6: Acknowledge the reduced risk associated with 3D Secure transactions by lower merchant service fees Recommendation 7: In the spirit of SEPA, merchant service charges should not distinguish between domestic and crossborder transactions Recommendation 8: Merchants urge the European payments industry to implement a pan European OBeP solution Recommendation 9: Ecommerce Europe calls on all stakeholders in the payments industry to introduce a viable, interoperable, alternative for the paper mandate: the e-mandate Recommendation 10: Merchants request more harmonisation and clarity regarding the legal framework, fee structure and chargeback rights associated with wallet solutions
4 POSITION PAPER This position paper on online payments aims to: In this 2013 position paper, Ecommerce Europe highlights 6 topics that are top of the agenda for merchants. The topics will be discussed by the European merchant community during the pre-conference on e-payments of the Global E-commerce Europe 2013 in Barcelona. Reactions to this position paper are encouraged and should be addressed to Mr. Paul Alfing, Ecommerce Europe: paulalfing@ecommerce-europe.eu. Payments from the merchants perspective Although developments are fast in internet retail and in payments, three basic and universal priorities that merchants have for payments remain firmly the same as when they were introduced in last year s position paper. Merchants ask for (in this very prioritisation order): 1. Reach 2. Conversion 3. Fair cost (Web) merchants determine their optimal payment mix based on these three criteria. Reach is defined as the number of potential buyers that has access to the mix of payment methods. The total reach of a merchant s payment mix determines whether an interested visitor can become a customer. The conversion determines the probability of that potential customer becoming an actual customer: it determines business volume and revenue, among others. Conversion is, among other factors, strongly influenced by the usability of a payment method, the familiarity of the user experience and the technical reliability of the payment method. Finally, fair cost of the payment partially affects the profitability of each transaction. The cost of payments, including cost incurred from fraudulent payments and exception handling, is among the merchants most prominent concerns, but only after both reach and conversion are satisfied. These three priorities are valid irrespective of the type of merchant or the channel. They apply to any channel, device (mobile, fixed) or screen size (large, small). 1. Access to the payment account A new development that merchants have high expectations of is the concept dubbed by the European Central Bank (ECB) access to the account. 1 The idea of banks opening up their payment accounts for third parties to get information or initiate payments is inspiring and can boost innovation. Access by third parties could enable non-bank payment service providers to provide information services and initiate payments outside the context of today s schemes through an arrangement that appears similar as an API. A situation where new payment products can be established by individual entrepreneurs and payment service providers that deliver e-payment initiation services, can accelerate product development and foster competition. Merchants welcome any development that strengthens innovation and competition in payments for consumer-not-present contexts. Consumers can also benefit from new information services that come with their payment accounts and new forms of payment initiation built on top of SEPA instruments (such as SEPA Credit Transfers and SEPA Direct Debits). Solutions can be tailored for specific contexts, while leveraging reach of the SEPA payment products. Some important remarks have to be placed by this initiative however. Merchants prime interest lies with a reliable, trustworthy and secure payment landscape in Europe. New developments can bring positive features, but they must always be contained in a clear regulatory framework so merchants and consumers can have a clear understanding of rules and conditions. The regulatory and licensing regime of the revised Payment Service Directive should be wide enough to assure the reliability and security of third party payment providers both for the consumers and the merchant. Clear rules on liability should also be established. Introduction of this new class of payments should be accompanied by adequate communication by the third parties developing the services and by the 1 http://www.ecb.int/pub/pdf/other/recommendationspaymentaccountaccessservicesdraftpc201301en.pdf?181a9a2566fe901def47ddd1b44cc567
POSITION PAPER 5 issuing banks. We risk confusing the market if services are not positioned properly. Lastly, as a concern, we see that in the current set of recommendations from the ECB, no technical standards are mentioned, nor does it introduce a standard set of contractual arrangements between third parties and PSP s. Merchants demand reach from the payment methods they wish to accept. From the experience with SEPA, we can learn that the absence of such a structure limits scalability of any services. Therefore, we ask for a structure of technical and contractual arrangements that enable scalability of services based on payment account access. Recommendation 1: Move forward with access to the payment account for third party payment providers duly licensed within the scope of a revised PSD Recommendation 2: Communicate adequately to educate both consumers and merchants about the possibilities and conditions for this new class of payment instrument Recommendation 3: We ask for European authorities to provide a structure for technical and contractual arrangements to assure legal clarity and technical scalability for third party services 2. Strong authentication Web merchants welcome initiatives towards re-using existing credentials to identify customers and to provide stronger authentication methods with minimal negative impact on conversion. Strong user authentication allows for reduced fraud and risk levels. Web users often have multiple online identities. They use different names and credentials for social network profiles, to access their bank account, logging-in to applications for work or education and government websites. These logins or credentials could be verified or unverified, depending on the level of security required. Strong authentication and the re-use of credentials is the first step towards more comprehensive e-id services and could also bring significant benefits for payments. Some of these benefits are: 1. Security of payments: strong authentication will improve the security of cards, credit transfers and direct debits. Harmonisation will lead to a better user-experience, more trust and therefore more sales 2. Improvement of the mobile shopping experience: mobile screens are small. Using previously stored (on- line) profiles will reduce the need for input by buyers and will therefore increase accessibility to the mobile channels 3. Reduction of fraud: with better authentication services merchants can prevent fraudulent transactions, leading to a reduction of fees for merchants Strong customer authentication is at the very heart of the ECB s Recommendations for the security of internet payments 2. For merchants, this recommendation goes even further than payments. Strong authentication makes the internet a more reliable place to do business. Merchants welcome services that leverage those authentication methods that are already in place and customers are familiar with, to be re-used in neighbouring contexts. Security solutions for payment related services are important for all internet retailers, not only because of direct effect on business, but also because negative experiences of individual consumers have their impact on the total market for home shopping. It is considered a shared responsibility for all parties involved in internet payments to have adequate security in place to foster trust of consumers in the web channel. Special attention is required for the customer s privacy. It is not always (if ever) needed for merchants to know the exact identity of customers in the shopping process. It would be greatly beneficial for merchants to be able to trace back users identity in case of any problems. 2 http://www.ecb.int/pub/pdf/other/recommendationssecurityinternetpaymentsoutcomeofpcfinalversionafterpc201301en.pdf
6 POSITION PAPER Recommendation 4: Merchants welcome solutions that re-use existing authentication methods to improve security, protect users privacy and streamline user experience 3. Card based payments and 3D secure Cards remain the dominant payment instrument online. This can be explained by the large reach they offer, which is the first universal principle for merchants when choosing payment options. In terms of conversion, however, cards are suffering from inconsistently implemented 3D Secure solutions by issuing banks and an unsafe image in the eyes of consumers. As long as 3D Secure is not applied universally, card details still represent value, which make them interesting for fraudsters. 3D Secure currently does not help conversion (it reduces it), especially with the variety of implementations by issuing banks. 3D Secure often requires (additional) signup from every credit card holder, putting him up with another password. Sometimes the customer is forced to do this before he can proceed with the payment without knowing of the benefits of doing so. A clear communication from credit card companies towards the consumer is often lacking. All of this significantly reduces conversion. Recommendation 6: Acknowledge the reduced risk associated with 3D Secure transactions by lower merchant service fees Recommendation 7: In the spirit of SEPA, merchant service charges should not distinguish between domestic and crossborder transactions 4.Online Banking e-payment solutions Within months of the SEPA end date it s time for the SCT to start delivering online. With an integrated market for credit transfers, the reach of this payment methods can compete with that of cards. It is up to the payment industry to make this reach available for use in e-commerce. Online Banking e-payment (OBeP) solutions are common in several European regions and are highly appreciated by merchants and consumers. For the merchants because OBeP transactions (the ones based on credit transfers) do not have charge back risk and for consumer because OBeP transaction use the online banking service consumers are familiar with. An OBeP solution that leverages the reach of SEPA would be of tremendous value for the merchant community. Because 3D Secure limits the risk for banks, usage of 3D Secure should lead to lower cost. Therefore 3D Secure transactions justify a lower merchant cost (MSC or Merchant Service Charge). Credit cards offer superior reach across Europe. However, on the aspects of conversion and fair cost, there is still a lot to be gained. Also, this European wide reach comes with different tariffs for different geographies. In the spirit of SEPA, there should be distinction between domestic and cross border fees within the European Union. Recommendation 5: Improve the user experience of 3D Secure and harmonise where possible. A user experience that is familiar, consistent (i.e. by reusing existing authentication methods) and does not contain unnecessary steps in the check-out process, would improve the conversion of 3D Secure Merchants still hold high expectations for the MyBank initiative 3, developed by EBA Clearing. MyBank potentially unlocks e-payments for all European countries, through the familiar and trusted online banking portal in combination with the SEPA payment instruments. Recommendation 8: Merchants urge the European payments industry to implement a pan European OBeP solution 5.SEPA Direct Debit and e-mandate Direct debits are an attractive and cost effective way of paying in specific situations, such as recurring payments and situations where the risk is low or where the amount is not fully specified at the moment of ordering. In last year s edition of the position paper, web merchants raised attention for e-mandates as a means to unlock SDD s 3 More information about the pilot: https://www.ebaclearing.eu
POSITION PAPER 7 potential for the web. In the months following this appeal, we did not see the developments that we hoped for and SDD is still poorly available for internet retailers. The MyBank initiative mentioned before holds potential with regards to e-mandates, but it seems that this does not materialise in the same pace as e-payments do. Also, the implications of the additional conditions as mandated in the regulation 260/2012 for usability of the SDD (white listing option) are still unknown. In the absence of one clear initiative by the banking sector, individual service providers are launching proprietary solutions that address the need for an electronic mandate. Merchants would like to have clarity on the status of these non-bank solutions. Recommendation 9: Ecommerce Europe calls on all stakeholders in the payments industry to introduce a viable, interoperable alternative for the paper mandate: the e-mandate 6. Wallet solutions Wallet solutions are a viable candidate to bridge the gap between online, offline and mobile payment contexts and to improve the usability of cards, because users do not need to type in card credentials. They can be used both on the internet as in brick and mortar stores, different funding sources provide consumers with the flexibility they need and a uniform interface on the merchant side enables merchants to rationalise payment options. Although PayPal can be regarded as the dominant player in this field, contesters are warming up to step in the arena. Ecommerce Europe welcomes wallet solutions as a valuable alternative in their payment mix, as long as they are accessible to large number of buyers (reach), offer excellent usability and costs are in balance to their added value. Since using a wallet solution adds another player in the value chain, with its own rules regarding fees and chargeback rights, it results in added complexity for merchants, in case chargeback handling or refunds are required. Recommendation 10: Merchants request more harmonisation and clarity regarding the legal framework, fee structure and chargeback rights associated with wallet solutions
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