Europe

Europe: building a vivid e-commerce market

In general, Europeans are among the worlds most enthusiastic users of the web. As of March 2011, the total number of internet users in Europe alone reached 476.3 million, compared to 1.63 billion users worldwide37. Moreover, by 2014 the European online population is expected to grow by nearly 20%, with countries such as Poland, Russia, Ukraine and Turkey as the main drivers for this growth. Although the European Union is striving towards a single market, great divides in ecommerce maturity and IT development persist. Generally speaking, the Nordic countries in addition to the Netherlands and the UK are most advanced, while countries in South and Eastern Europe are catching up fast. Access to broadband internet has increased strongly in the new EU member states and the proportion of consumers having purchased goods online has grown accordingly.

The European e-commerce landscape has three regions

Europes geographical fragmentation is aggravated by the historical divide between Western and Europe on one side and the Central and Eastern European regions on the other side. This division, the result of the post-WW II Iron Curtain, is reflected in the current state of e-commerce across Europe. Countries that were part of the Eastern communist dominion are, with few exceptions, de facto developing markets, while the Western half of Europe includes developed markets with solid financial infrastructures. The broadband penetration rates are very different from one country to another. The percentage of broadband subscribers (DSL, Cable and Fibre/LAN) in the Netherlands and Denmark is 37%, in Germany and France about 30%. The lowest rates are Czech Republic and Poland with roughly 14%38. The European e-commerce space cannot be regarded as a single big market in itself, as there are significant differences from country to country. We can speak of three blocks. A mature market in Northern Europe, including the UK, Germany and the Nordic countries, where between 60% and 80% of all internet users are e-shoppers. The UK stands out as the worlds leading country for e-commerce. In 2011, the online spending in UK reached GBP 68 billion, up by 16% as compared to 2010, while in 2012, the online spending segment is expected to increase by 13% year-on-year, accounting for GBP 77 billion39. A growing market in France, Italy and Spain, where the total number of e-shoppers is lower compared to the numbers of internet users, but the number of new eshoppers is growing at a rapid pace. An emerging market in Eastern Europe. The growth potential for e-commerce is high in Central and Eastern European countries, despite the relatively smaller size of the e-commerce turnover and lower consumer spending.

In 2011, nearly 58% of internet users in the EU27 shopped online, as compared with 57% in 2010 and 54% in 2009; the proportion of e-shoppers among internet users ranged from 74% in the Netherlands to 13% in Romania and Bulgaria40. The e-commerce market is definitely going to move forward during the coming years as broadband penetration rates will increase and more importantly, the mobile internet will grow and fuel the convergence of online and offline channel. EMarketer for instance, estimates a climb in online sales from USD 150.3 billion in 2009 to over USD 202.7 billion in 201241.

PSD and e-SEPA no panacea for cross-border e-commerce

The well-developed e-commerce market has made for a highly advanced online payments landscape in Europe. Lacking the scale of a single market like the US, European situation sets the example for many other fragmented regions in earlier states of their development. Europe is a unique region in this report, as it knows a long and determined effort to integrate the EU member states into a single market. We will cover this effort as we discuss the implications of the Payment Service Directive (PSD) and SEPA more specifically e-SEPA. These are two important publicly led initiatives to harmonize (online) payments in the region. A third public force that is not to be underestimated is the constant debate by policymakers on the national and European level, on the topics of interchange and surcharging. It goes beyond the scope of this report to go into the details of these debates. It is our belief however, that legal certainty on the business level is a precondition for innovation in the payment industry. The current ambiguity does not contribute to a decisive atmosphere.