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Expert opinion

The trident of digital evolution in European payments and ecommerce

Tuesday 19 September 2017 | 10:15 AM CET

A trident of policy initiatives will soon transform European business: DSM, GDPR and the PSD2, says Monica Eaton-Cardone, The Chargeback Company

The Digital Single Market (DSM), General Data Protection Regulation (GDPR), and the Revised Payment Services Directive (PSD2) will shape the future of European payments market. Read below how these changes will reflect on businesses.

For Europe, the changes offer innovation: markets traditionally dominated by banks will open up, regulatory barriers will be torn down, and commerce will focus on the digital side of things.

For businesses outside the EU, the outcome could bring unintended consequences, essentially an impenetrable “walled garden” of European commerce, with high costs for compliance, privacy and competition.

Consolidating Europe into the Digital Single Market

No global region has proposed such a unifying legal framework for ecommerce as the EU’s Digital Single Market. The stringency of its regulations could create a barrier to market entry from abroad if global merchants decide Europe is not worth the cost of compliance.

Has the DSM been thought through properly? A key objective is to increase digital adoption among the European Member States, but the policy hasn’t accurately identified what’s holding consumers back. It aims to increase cybersecurity and protection for consumers – but lack of digital consumer involvement has not been conclusively attributed to an absence of trust.

In fact, when compared to Americans, Europeans are already far more trusting. Nearly 15% of Europeans feel that they have complete control of the information they provide online, whereas only 5% of Americans are very confident that personal information is private and secure.

Meanwhile, the University of Toronto and MIT examined the European Union’s Privacy and Electronic Communications Directive, revealing that privacy laws have decreased the effectiveness of advertising by 65% in applicable regions – and could lead to a 0.35% reduction in the EU’s gross domestic product.

PSD2 is a new vision for European business

To put it bluntly, PSD2 promises to help improve security and to support evolving payment initiatives by creating a layer of regulation (definitely needed), but not without disrupting the way many businesses operate and transact (the potential downfall). The payments industry is evolving according to different viewpoints, visions and interests. It means different things to different people and this diversity has created challenges.

“Payments” now effect every facet of an organisation, and decisions by these groups are subjective by nature, this is something that has motivated a change in these directives. PSD2 is geared toward helping regulate these effects to ensure sustainable opportunities continue to grow and evolve in Europe.

Payment initiation service providers, or PISPs, could steal card network customers and cause chargeback management frustration, yet concerns that PSD2 will harm the business of established players seems premature. A survey of the UK public found an appetite for new opportunities, but reservations about abilities of new entrants to secure their data:

The architects of PSD2 hope real-time bank transfers will make chargebacks and friendly fraud a thing of the past. Whenever buyers and sellers interact through a payment exchange, there’s always a need for dispute settlement – especially with the unstoppable march of ecommerce.

History repeats itself: expect chargebacks and friendly fraud to simply take on another guise as new breeds of fraud continue to evolve.

General Data Protection Regulation (GDPR)

Just what we need, another 4-letter acronym. So what is GDPR and what does it mean? Worryingly, a majority of merchants don’t yet know the answer:

The General Data Protection Regulation will come into force in 2018, superseding existing frameworks including the 1995 EU Data Protection Directive, and its strict expectations make the world’s current stance on privacy seem lax.

In a nutshell, virtually any consumer information that originates from the EU must stay in Europe and be managed according to new rules. Native cloud organizations will have less expense to confront in becoming compliant, but policy adjustments and enhancements are a necessary evil that can’t be ignored.

Global organisations involved in the surge of merger and acquisition trends face the most difficult transition; separating European activities and structuring silo policies will require concerted effort and a dedicated team who can think on behalf of the organisation as a whole – but also as its subsidiaries.

Misunderstanding this trident of regulatory change isn’t dissimilar to EMV’s patchy adoption, but non-compliant merchants jeopardise more than just their own bottom line, they simultaneously increase risk exposure for other industry members. Inconsistently applied standards harm everyone involved.

About Monica Eaton-Cardone:

Monica Eaton-Cardone is an international entrepreneur who provides sustainable revenue retention and risk reduction solutions to the ecommerce environment. She is the co-founder and COO of The Chargeback Company, known as Chargebacks911 outside Europe.

 About The Chargeback Company:

The Chargeback Company, known as Chargebacks911 outside Europe, provides comprehensive and highly scalable solutions for chargeback compliance, handling services and fraud strategy management. The company helps decrease the negative impact of chargebacks, thereby increasing revenue retention to help ensure sustainable growth for every member of the payment channel.

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