New checkout proposals by the European Banking Authority risk disrupting e-commerce

New proposals for more secure online checkout by the European Banking Authority risk disrupting the e-commerce industry.

e-commerce logistics has been growing considerably faster than other logistics markets due to the unprecedented growth of the e-commerce industry. As stated in Ti’s Global e-commerce Logistics 2016 report, growth in the industry is rocketing in emerging markets and even most developed markets are growing in double digits. Being the backbone of all retail, logistics has been one of the key enablers of growth in the e-commerce sector. And vice versa, by fueling demand for logistics solutions e-commerce has also provided rapid growth for LSPs.

However, experience shows that very often entire industries can be torpedoed by regulatory bodies. In the case of the e-commerce industry, such a risk could potentially come from the European Banking Authority (EBA). As cybercrime and online fraud are on the rise, in August this year the EBA proposed draft technical standards to prevent illegal activities. However, despite the underlying rationale for more secure online payments the EBA’s checkout proposals could seriously disrupt the e-commerce industry.

Namely, the proposals as to how to implement strong customer authentication include a ‘one size fits all’ approach where every online transaction over €10 will require additional steps at checkout such as entering passwords, codes or using a card reader. To illustrate the proposals’ scope of application, if implemented, it is worthwhile looking at the patterns of online payment behaviours: according to certain studies, 95% of European consumers spend over €10 when shopping online.

Ecommerce Europe, a European association representing online merchants, has recently voiced strong concerns regarding the proposed checkout regulations and has called on European legislators to challenge the new approach. The association emphasises that it is essential for the growth of e-commerce that regulation facilitates and stimulates innovative methods of electronic payments authentication rather than focus on only one method.

The unique selling point of e-commerce lies in its ability to provide consumers with fast, convenient and safe methods to shop for goods and services. So, if the approach of the EBA means that the payment process itself becomes more complicated, online shopping could lose its attractiveness. According to research conducted by Visa, the changes could impact as much as €6 billion in transactions across Europe. Cart abandonment would increase as more than half of consumers said they would abandon purchases if more steps were added to checkout.

If these forecasts materialise LSPs with a focus on e-commerce will inevitably be affected, at least in the short term. It should, however, be expected that the impact will diminish over time considering that in addition to preference for convenience, consumers, too, are interested in a high degree of security in retail payments.

The outcome regarding the final checkout regulations will be clear at the beginning of next year when the EBA is expected to publish its final proposed standards. And the outcome regarding the impact thereof on e-commerce and thus on LSPs will depend to a great extent on how quickly online shoppers become accustomed to the new rules.

If this brief has been of interest you might also like to download Ti’s Global e-commerce 2016 report. The report contains Ti’s bespoke market size and forecasting data, as well as overviews of some of the world’s leading e-commerce businesses. In addition, the report includes company profiles of both post offices, LSPs and dedicated e-commerce solution providers to showcase the different strategies shaping the market we know today. Ti will be publishing it’s 2017 version of the report early next year, for more information, contact Michael Clover, [email protected].

Source: Transport Intelligence, December 20th, 2016

Author: Violeta Keckarovska