12 May 2015
‘There is more to a Digital Single Market than legislation from the European Commission’
Better online access to digital goods and services, create an environment where digital networks and services can prosper and use digital as a driver for growth. These are the three pillars of the Digital Single Market strategy (DSM) that the European Commission (EC) presented on the 6th of May. The EC sets out sixteen initiatives to facilitate cross-border e-commerce in Europe. In this blog Marlene ten Ham, secretary General of Ecommerce Europe, explains why the EC took this approach to make the digital market a top priority.
Europe should embrace the digital revolution and open up digital opportunities for people and businesses, because the full potential of the European e-commerce market has not been reached yet. Only 15 per cent of consumers shop online in another EU country, according to a press release from the EC. Ten Ham: “Only 7 per cent of SME’s sell their goods abroad. It sometimes is cheaper to buy a product from China than from a neighbouring country. We are convinced that there is a lot of potential in this single digital market.” In the DSM there are fewer barriers, and more opportunities: it is a seamless area where people and business can trade, innovate and interact legally, safely, securely, and at an affordable cost, making their lives easier.
Fragmentation on rules across countries
There is a lot of potential for cross-border e-commerce, but adoption has been rather slow so far. This has several reasons, according to Ten Ham. “On the one hand there is the lack of information about cross-border e-commerce. We also see that there is a fragmentation of the legislation on VAT, consumer rights, privacy and parcel delivery. It would be so much easier if there would be a harmonisation of the rules across Europe. At the moment there are 28 interpretations of the European legislation, which keeps the European market divided. For SME’s it is too much work to know about all the legislation in the various countries.”
The EC acknowledged these barriers too, making it a top priority to form a digital single market. “The aim for the new DSM is to tear down regulatory walls and finally move from 28 national markets to a single one. A fully functional Digital Single Market could contribute 415 billion euros per year to our economy and create hundreds of thousands of new jobs,” according to the press release.
Harmonisation within present legislation
Although the new strategy is a big step in the right direction, Ten Ham explains that there is more to reach a digital market than legislation. With seventeen national e-commerce associations combined in Ecommerce Europe they represent 25000 web shops in Europe. Ten Ham: “We have a lot of knowledge about the market and the solution to a truly single digital market is not only top down, but also bottom-up. Take a look at the various markets and try to harmonise the rules within the present legislation. That is much faster and more effective than new legislation. The EC should not make things too complicated.”
According to the Secretary General there can be many initiatives to promote European cross-border e-commerce from the stakeholders without the meddling from the EC. One example is a European quality label for web shops so that consumer can shop online with confidence. Ecommerce Europe is developing a label at the moment. Another initiative is a web platform on e-logistics to bring delivery operators and online merchants together. Ten Ham: “When smaller online merchants join forces with parcel delivery they are more likely to profit from economies of scale.”
With this kind of smart ideas it is easier to get this digital single market started than to wait a couple of years before the legislation is effective and the reality changes. “When the rules on e-commerce are harmonised, 57 per cent of the merchants would sell their goods abroad,” says Ten Ham. “The first step to the DSM is fantastic, now it is time make sure we don’t lose momentum and help the e-commerce market grow as fast as possible.”
“The biggest advantages of this wave are the underlying technologic opportunities that can disrupt the world we live in. It is not that we did not have these opportunities before, but the needed tools are now available for everyone,” Ginsel says. If someone tried to start a technological company earlier, he needed a huge amount of money because he needed to build a data center. Nowadays almost everyone can enter de technological market with ‘only’ a couple of thousand euros as seed money. “And with more people entering this market, the creativity is growing. When you connect all these innovations, new solutions will arise. That is what is going on right now, in the new wave that people call fintech.”
But what will be the role for traditional parties with all these new parties in the market? “Their role will change significantly. The big financial parties are used to do everything in-house. They develop services and products and are trying to sell those. That is the main focus. On the side, they give a little customer advice about those products. But it is hard to be a product factory and to give honest advice as well, because the one may affect the other. Banks should decide what it is that they want to do in the future. Do they want to be a product factory or an advisory institution? This differentiation is required,” states Ginsel.
If a bank decides to focus on the ‘product factory’, they need a partner to take care of customer services. “I think parties can create the best products and services when they connect with other specialists as much as they can. For example: one party takes care of the product development, while the other party handles the clients. This sounds good, but it requires awareness of their new tasks from all the parties. They should get away from the idea that they have to do everything by themselves,” Ginsel says.
So, if traditional parties want to survive the current storm of developments, some tough decisions are required. It can be frightening, but moving with the developments of the market can actually help financial institutions re-invent themselves and be more relevant for end consumers. Either way, being open to the possibilities is way better than waiting for the storm to lie down – or getting swallowed by it.
Don Ginsel, CEO Holland FinTech
“There is little love for technology in the financial world, while everything is about technology these days.”
- Regulation & Compliance