Banks blamed for hobbling UK e-commerce growth

In a week when one survey says UK online shopping is on the up, a government report says it's being hobbled by banks.

Banks are holding back UK e-commerce, with many startups having problems getting online transactions processed, a government report has found.

The report, published Monday by the government's Performance and Innovation Unit, recommends an inquiry into the banks' role in online transactions. Vice president of e-commerce firm Open Market Alan Cornwell says British banks are not rushing to embrace e-commerce. "The banks are happy to slow the process down until they are more comfortable with the idea of online ventures," he says.

One of the main problems for e-commerce start-ups is getting the banks to set up merchant accounts -- the process for online credit card transactions. "It is fairly difficult to get a merchant account with a bank," says Cornwell. "It is the same process online as high street retailers go through and it can take a long time to set up."

The government has called on Don Cruickshank, the Action 2000 action man who is also heading up an Independent Banking Review, to push banks into changing the system. Sue Lewis, who is also working on the review, admits the rules on merchant accounts may need changing.

"We haven't worked out what the problem is yet. It may be the merchant acquiring rules. We are looking at it currently to make sure there are no barriers to doing e-commerce," she says.

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