“We are all Europeans and there is actually no concept of cross-border ecommerce”, said Michael Salmony, executive adviser at Equens during EPCA Payment Summit, earlier this year. The whole notion of cross-border ecommerce in Europe resides in the old times, when we actually had real geographic borders which now become irrelevant. Nevertheless, cross-border ecommerce is increasingly important on the digital agenda of the European Commission, aiming for the past ten years to create a Single European Payment Area (SEPA).
From merchants’ perspective, even though the European borders are of no importance, they have to pay attention to the different aspects of cross-border ecommerce that can pose increasing challenges, such as local habits and traditions, local preferred payment methods, tax structures, and distribution and logistics. In order to handle cross-border ecommerce, merchants need to ensure they accept global payment standards. As Johan Lindstrom, Senior Business Leader at MasterCard, said “if they focus too much on the local standards they will struggle to attract business from other markets. It is a fairly obvious statement but it is quite often forgotten”. The same goes for banks or MNOs or payment solution providers; they have to work with global standards. If they develop small domestic schemes, they cannot benefit from the expansion into new markets, nor can they capture the better offers available for their consumers in other markets.
Since interchange fees are so different all over Europe, for example, in one member state the fees can be at least 10 times as high as in another member markets, retailers who want to make a European white offer have to differentiate between the member states in which they are offering their products. If the interchange fees could be brought to one level playing field – and Visa Europe is already taking the first steps in this sense through the Cross Border Domestic Interchange Program (CBIDP) scheduled for launch on January 1st, 2015 – this will greatly increase their possibilities to operate at a European level. On top of that, working with only one or two banks would save costs. Ignacio Gonzalez-Paramo, VP Global Compliance at Payvision, explained more about the new proposals for European payments regulation with respect to Multilateral Interchange Fees.
In terms of cross-border fraud prevention, there’s a growing interest from merchants’ side, as most have a good understanding of their domestic markets, but international expansion through cross-border ecommerce demands an understanding of the fraud profiles of the countries in which merchants seek to offer services, as well as consumer payment preferences and buying behaviors. This knowledge is not easily acquired by merchants, they have to be supported by their PSPs or other solution providers. Kieran Mongey, from RED Worldwide stated: “In the emerging markets, we see new fraud patterns and all players within the payments ecosystem have to sit together at very early stages to think about how to fight back these new patterns”.
Cross-border ecommerce is thriving in Europe, with more than 12% of online shoppers buying inside the European Area, and close to 8% outside the EU. Merchants, PSPs and acquirers active in the region need to provide consumers with confidence and security in order to support this growing tendency of cross-border shopping. To learn more about cross-border ecommerce in different countries, check our dedicated Cross-border eCommerce Infographic page.