Every e-store owner or trader on buy-sell platforms wants to increase their sales and expand their customer base. Estonia is small, and here the sales limit can quickly be reached, making acquiring new customers more difficult. Then it is worth looking beyond the national borders. In some ways, when the new laws come into force, cross-border sales will become easier, but on the other hand, they will become more difficult. What do these changes entail and how will they affect your e-commerce business, regardless of where your business is located?
Why are these changes necessary?
Although the E-Commerce Directive remains the cornerstone of EU digital commerce regulation, much has changed since its adoption 20 years ago.
The new rules aim to promote innovation, growth and competitiveness in the single market and create a safer and more open digital space for all parties. They aim to make online shopping easier, clearer and safer for the consumer, regardless of location, and to ensure equal opportunities for companies.
If you think positively, then changes are necessary so that your opportunities to grow are wider.
New VAT rules for online sales of goods and services will come into force in July.
We wrote a separate article about this. Last year, a new payment services directive (open banking) and new regulations for cross-border parcel transport services and consumer protection regulations entered into force in the EU. At the moment, the demand for more secure authentication of the buyer and Brexit are relevant. What do you need to know?
Why are these changes necessary?
Requirement for more secure buyer authentication
As cross-border transactions continue to snowball, the authentication process has become much more complex. From 01.01.2021, e-shopping can only be done by entering credit card information. The bank link was already popular in Estonia, but the regulation makes internet bank payments much more widely available as a payment method elsewhere.
On the plus side, one standardized payment method across Europe can be a strong engine for export growth for the ambitious. With online bank payments, the merchant should also have more money in hand. Payments made through Open Bank can have significantly lower costs per transaction than card payments, less than 1%. Fees for card and wallet-based payments are typically 3% of the transaction. The instant payment option can also help merchants improve cash flow and reduce the risk of fraud and cancellations.
In the general picture, the life of a merchant in the field of payments has become more and more complex and multifaceted.
On the one hand, there is a need to respond to consumers’ growing demand for convenience and options. By doing this well, you can build customer loyalty and win new customers. On the other hand, it adds a lot of work. Compliance with various regulations, card system standards and anti-fraud efforts must be monitored, along with the integration and management of multiple login options, payment service providers, methods and currencies.
Open banking
With the new EU payment services directive, the payment services market was opened in September 2019, the aim of which is to increase competition and expand the opportunities for both private and business customers.
Although the concept of open banking is a few years old, it has yet to fulfill its promise to date. Today, it is still relatively difficult to find a solution that facilitates choices, as well as being technically and economically efficient.
Unfortunately, software systems are simply not flexible, interoperable or intelligent enough to keep up with the growth of e-commerce. Hopefully, the following changes will create an environment where this field will actually develop rapidly.
International shipping – hopefully getting easier and cheaper
Problem –Prices for cross-border parcels are on average 3-5 times higher than local delivery prices. 62% of companies that want to sell online see high shipping costs as a problem. This is an important obstacle in the development of cross-border e-commerce.
The purpose of the regulation on cross-border parcel transport services is to increase the transparency of national tariffs, to guide the tariffs of cross-border parcel transport services and to increase the regulatory supervision of parcel transport services.
Under the new rules, there is no cap on delivery prices, but companies must now clearly display their prices so that consumers can easily compare them.
At some point, you may get information about the different options and the fees to be paid right away in the store, but not soon.
For the time being, consumers can also check the prices of parcel delivery on the special website of the European Commission.
Protection of consumer rights
Problems in this area are divided: Unfair trading practices, unfair prices, warranty, product safety, scams, location-based blocking (geoblocking).
You can review the main and previously applicable rules related to consumer rights on the blog of the E-Commerce Union.
In 2020, they were supplemented by the cooperation regulation of consumer protection authorities, the purpose of which is more effective protection of consumers and their fundamental rights online, making buying and selling platforms more transparent and creating a more effective accountability framework.
- From January 2020, it will be easier for consumer protection authorities to remove from the market e-shops, websites or social media accounts where fraud schemes have been detected.
- Making information requests from internet service providers or banks to identify fraudulent online merchants was made legal.
- Buy-sell portals and marketplaces had to start making a clearer distinction between merchants and private individuals, so that consumers are aware of their rights if something goes wrong.
If the seller is a private person, the goods or services are not protected by law, nor are consumer rights extended (right to file a claim, 14-day right of withdrawal, etc.), and when buying from a private person, you cannot contact the Consumer Protection Board in case of problems:
- The platform search must clearly state if the trader has paid for better visibility.
- Also, the portal must clearly inform about the main parameters that determine the ranking of the results.
Benefits? National authorities now have greater powers to detect non-compliance and take swift action against rogue traders.
EXAMPLE: Order traps
A consumer is offered a free trial period (e.g. on a dating website) or is offered a free expensive phone upon signing up.
When consumers provide their credit card information to gain access to such offers, all too often they later find out that the membership fee will be deducted each month without their explicit consent.
In the past, the authorities were more powerless in such situations, even if they received repeated complaints. They can now contact the merchant, explain their withdrawal rights and stop unwanted orders.
When national consumer protection authorities work together at EU level, they save taxpayers’ money.
Brexit
The transition period of Great Britain’s separation from the EU has ended. For the Estonian consumer, this means that from January 1, VAT will be added to postal parcels over 22 euros ordered from the UK, and customs duty will be added to postal parcels over 150 euros, the tax rate of which depends on the specific item. When sending goods from Estonia to the United Kingdom, the goods must be declared at customs if their value exceeds 1000 euros.
Read more information about the merchant from the blog of the E-commerce Association.
Summary
On the one hand, the changes add work and administrative burden. On the other hand, they create opportunities for growth both domestically and cross-border.
In any case, the Acty team is ready for changes and taking advantage of opportunities.
If you are an ambitious merchant who wants to win more customers and offer them value-creating solutions, we are happy to continue the conversation as a dialogue.
