E-commerce is growing rapidly in this digital age. Retailers are having to adjust to the world of the social media generation and transform the way in which they not only sell to but also generally engage with the smartphone and tablet consumer.
With e-commerce comes the need for e-payments. There is now a plethora of e-payment solutions in the global market, and innovation in digital payments continues to flourish.
Banks are also trying to keep up with the rapidly changing e-payments environment.
At the IBC Asia conference on Mobile Wallet last week, Qasif Shahid, head of Remote Banking and Business Development, MCB, Pakistan, commented that banks need to re-engineer their onboarding process for customers to take into account the new digital world. He recommended that banks rethink their business models, because they are trying to retrofit new products onto their legacy systems. Qasif advocated a radical approach: Build a bank within a bank within the cloud using social media — the SMAC Stack (social, mobile, analytics, and cloud).
The conference also noted that greater collaboration between players and a focus on interoperability in the digital world would help promote e-payments.
However, regulation of e-payments in many parts of the world lags behind technological and commercial developments.
In the EU, the Payments Services Directive provides a single legal regulatory framework for e-payments within Europe. The EU also has in place the European Payments Council to coordinate and oversee decision making within the European banking industry in relation to payments.
Europe is also at the threshold of establishing a Single European Payments Area (SEPA), which will cover not only credit and debit cards, but also the internet and mobile payments.
However, the Asia-Pacific region faces a number of unique challenges in regulating e-payments. The region includes a mix of developed markets with high smartphone penetration and e-payment use, as well as a number of developing economies where there is a greater reliance on cash and smartphones are not yet available or just entering the market.
Also, unlike the EU, the Asia-Pacific region has separate jurisdictions with separate governments, operating with different agendas, and in some of these jurisdictions, multiple regulators have oversight responsibilities over individual aspects of e-payments regulation.
Last week, PayPal and eBay published three reports in Europe, the US, and Asia-Pacific, focusing on the e-payments sector.
PayPal points out that in order for the Asia-Pacific region to maintain recent levels of growth in e-commerce, a concerted and focused effort is required to create a consistent regional approach to regulation of e-payments. It suggests that regulators across the region should actively engage in dialogue focusing on reconciling differing interests and objectives of regional legislation within the e-payments sector.
PayPal identified a number of shortcomings in the existing regulatory process:
Innovation creating new challenges that may have never been seen before and that regulation can struggle to deal with
The rate and pace of change compromising the effectiveness of existing legislation
The increasing number of policy and regulatory stakeholders focusing on payments can create uncertainty in the market and delay required change
New opportunities for regulatory intervention that are missed because no one is focusing on them.
To address these shortcomings, PayPal recommends creating regulation that is outcome focused and that cannot be compromised by the specifics of any one technology, business model, or operating model.
PayPal advocates the use of a new decision-making model — SMART Governance — that uses technology and data to better inform and validate the regulatory development process. PayPal believes that this will introduce better regulation into the market, with better results than is the case today.
PayPal has called for the establishment of a specific e-payments subgroup within the APEC Electronic Commerce Steering Group with the goal of establishing a detailed and consistent framework that individual regulators within each jurisdiction could use to tailor local regulations. It proposes that this group should be charged with the agenda to promote the development and use of e-payments within Asia-Pacific by creating legal, regulatory, and policy environments that are predictable, transparent, and consistent.
Whilst regulation is desirable to create a level playing field and ensure clarity for both providers and consumers, regulators must be careful to ensure that regulation is technology neutral and does not hinder innovation. There is also a growing need for international standards to ensure greater interoperability and compatibility. However, the real challenge is the implementation of these proposals on an international or regional basis.