EU action for an integrated online retail market

According to European Commission statistics the current level and volume of e-commerce in the EU shows significant growth potential. E-commerce represents only 3.4 per cent of all European retail trade and despite its steady growth in recent times, there nonetheless remain a number of barriers holding back this potential growth curve.

In a Green Paper issued in early January the European Commission is chartering potential ways and means of dealing with these obstacles in order to attain an integrated European market for card, internet and mobile payments, thereby increasing e-commerce. The facilitation of payments by electronic and mobile means is critical to this end due to the disproportionate cost of payments for consumers and merchants, especially for low-value payments and the security concerns associated with online and mobile-based payments.

The Green Paper identifies some ways to stimulate the further integration of both electronic and mobile card payments, notably by redressing market fragmentation, enhancing security and trust in online payments, promoting business innovation and standardisation of the various components and interoperability.

Maltese business perspective: The facilitation of card payments whether by electronic or by mobile means is a useful support measure for enhancing e-commerce. The euro retail payments market is one of the largest globally but despite this critical mass and the fact that both internet and mobile payments are on the increase, there has as yet not been a concomitant reduction in consumer costs, in bank charges or merchant fees levied at payment transaction stage.

Any forthcoming EU regulatory action should therefore earmark the infusion of greater completion within the cards payment industry by granting market access to new entrants and by allowing established operators to operate cross-border across the internal market. In this way, consumers would benefit from a wider choice of service providers.

Small enterprises would benefit substantially given the propensity for businesses to undertake several online payments, through secure internet banking. Clearly, Maltese businesses would benefit considerably from the facilitation of settling payments for their purchases and the settlement of their administrative fees if a financial incentive is in place to resort to online and mobile payments rather than to traditional over-the-counter transactions.

New ambitious plans to increase e-commerce in the EU

The development of electronic commerce and online business services are at the core of a new action plan adopted by the European Commission with the aim to double the current volume of e-commerce in the internal market by 2015. The action plan has been presented as a Commission policy paper, outlying no less than 16 targeted initiatives tailored to double the share of e-commerce in retail sales, currently at 3.4 per cent, and the share of the internet sector in EU GDP, now standing less than three per cent, within a four-year long timeframe.

The Commission Communication has a wide-ranging scope as it deals with any commercial service that a company offers online, such as free web-based email accounts, search engines, internet call services (like VOIP), news services as well as social networks. In short, the action plan is meant to facilitate cross-border access to online products and content, to solve the trust-related problems associated with online payments and ensure delivery of purchased items, therefore reinforcing consumer confidence in e-commerce. It also aims to improve what are known as “key enabling factors” like high-speed wireless and fixed broadband. In practise, the Commission will be adopting a recommendation on access-pricing schemes in the wholesale market to improve investments in fibre deployment and conceive an EU strategy on cloud computing.

Maltese business perspective: Certainly this communication is a welcome initiative in the context of the ever-growing strength of e-commerce in Malta in both volume and commercial value of online transactions carried out by consumers and businesses alike. Beyond the various recommendable initiatives announced in the action plan, the communication rules out some EU media reports that the Commission intended to revise the current Electronic Commerce Directive.

This directive, adopted in 2000, sets up the internal market for electronic commerce, providing legal certainty for businesses and consumers alike. Critically, it establishes harmonised rules on issues such as the transparency and information requirements for online service providers, commercial communications, electronic contracts and limitations of intermediary service providers.

The decision to retain the current legal text is a commendable decision as it avoids the uncertainty associated with the launch of an EU legislative initiative, which often leads to a protracted process. It is worth recalling in this context that the current e-commerce directive took almost two years to be approved. For Maltese business operators, particularly those enterprises actively involved in spearheading investment in the booming ICT sector, legal certainty backed by a sound regulatory environment is of critical importance. The core principle of the e-commerce directive stipulating that online service providers need only to comply with the rules of the country where they are established provides the requisite legal certitude paramount for invigorating private investments into ICT-based business solutions.

For more information on EU affairs related to business, one may contact the MBB on 2125 1719 or email info@mbb.org.mt. One may also visit www.mbb.org.mt