The proposal displays a serious lack of understanding of the payment market, in particular with respect to payment instruments used by consumers in cross-border e-commerce.
In order to combat cross-border e-commerce VAT fraud the proposal focusses on credit transfers, direct debits and card payments:
“In recent years, more than 90 % of online purchases by European customers were made through credit transfers, direct debits and card payments, i.e. through an intermediary involved in the transaction (a payment service provider), and this is a trend that will continue in the future.” (Proposal p.3)
“The payment data in the regulatory option will refer to data on credit transfers, direct debits and cards payments because – as mentioned above – they represent almost the totality of the purchases online. Therefore, the providers of that kind of payment services will be in the scope of the regulatory option.”
(Impact Assessment SWD(2018) 488 final, p. 24).
Except for cash transactions, regulated Payment Service Providers (PSPs) are usually always involved in payment transactions. The role of PSPs is not restricted to the payment instruments credit transfers, direct debits and card payments – as suggested in the text of the proposal quoted above. PSPs are also involved in almost all other (legal) cashless payments. This is not a trend (as indicated in the Proposal),it is simply the consequence of payment regulation within the EU.
Therefore, all cashless payments in European-wide cross-border e-commerce are involving regulated PSPs according the definition of the Proposal (Art. 243a Par. 1). Only cash transactions can be carried out without involvement of a PSP. But while cash plays a minor role in domestic e-commerce (e.g. Cash-on-Delivery), in cross-border e-commerce cash can be neglected.
The Proposal states that credit transfers, direct debits and card payments would cover almost the totality of online purchases. However, both sources referred to in the first quote above are contradicting this assumption.
The cited “e-shopper barometer 2017” of the DPD group says, the preferred payment methods in European e-commerce are digital wallets (PayPal and Alipay) with 43%, Visa/Mastercard (35%) and domestic card schemes (23%). Only 20% of the interviewed consumers mentioned credit transfers as preferred payment method (20%). Only 11% are preferring direct debits. These figures are related to the total e-commerce activities of consumers (domestic and cross-border). Figures for cross-border e-commerce (currently unknown) would probably display even higher preferences for digital wallets and international card schemes, because domestic cards and domestic e-payments schemes (like iDeal) are rarely accepted outside the country (if at all).
The report of A.T. Kearny (European Payments Strategy Report 2013) which is cited, as well, predicts “the increased use of alternative payments, coupled with fewer cash and ACH transactions” in general
(not only e-commerce). The report defines alternative payments methods as “payments not initiated through a bank account and conducted between mobile phones, through m- or e-wallets, or other non-standard arrangements” (p.5).
Citing these studies, the conclusions of the Proposal should be: credit transfers and direct debits are not the most relevant payment methods in e-commerce, their market shares will decline. Apart from card payments, we have to consider alternative payment instruments as most important payment methods for (cross-border) e-commerce.
Recommendation: In order to find a suitable methodology of payment data collection for the specific instruments most widely used it is essential to get a better understanding of the preferred payment methods of consumers in cross-border e-commerce.