E-payment services - PTS-ER-2004:2

01/03/2004

The National Post and Telecom Agency (PTS) has been assigned by the Government to analyse the situation concerning electronic payment solutions offered to businesses and consumers for payment of goods and services via wired or wireless electronic communication. It is stated in the assignment that the report should contain a description of any impediments to increased use of electronic payment solutions and also proposals for measures to eliminate them. This document comprises the final report on the assignment. A preliminary report was submitted to the Government on 15 October 2003, E-payment services – preliminary report. Consumer attitudes towards e-payment services and future work.

There are several reasons to seek the increased use of electronic payment services, both in the physical and in the virtual worlds. In the case of e-commerce, there is a need that traditional payment services do not satisfy as regards security, speed and low costs. In particular in branches that take payments of small amounts, it is important that there are alternatives. In second-hand markets, payment services are adapted to transactions between private people.

The market for e-payment services is complex and encompasses a number of categories of actors. These are primarily banks, account/credit card companies, telecom operators, e-wallet undertakings, Payment Service Providers (PSP), ecommerce enterprises and consumers.

The use of e-payment services is still relatively small. E-commerce enterprises’ choices of e-payment services are based on their own needs and the habits and the wishes of the consumer. Among the ten largest Swedish webshops, the most common means of payment is cash on delivery, followed by account/credit cards and giro payments on invoice. After this there are customer cards, direct payment and electronic wallets, in that order. Based on the aggregate turnover, e-wallet payments represent one per mille, direct payments five per cent and card payments approximately 30 per cent. The authorities that accept payment via the web accept cards and direct payment.

Broadband users are more regular online buyers than those who have dial-up access; 67 per cent and 46 per cent respectively have bought online during 2003. Almost a third of those who have bought online have released their account/credit card number on the web, and less than a half per cent have been the victim of account/credit card fraud. Increasing numbers of people release their card number on the Internet, but more have become more cautious with disseminating e-mail addresses, telephone numbers and home addresses. Of those who buy online and disclose personal data on websites, only one-fifth first check whether the connection is encrypted. Ten per cent of broadband users have experienced different kinds of intrusion into their computers, and the corresponding figure for those with dial-up access is six per cent.

There are a number of impediments of different dignity for increased use of epayment services. These can mainly be grouped under confidence and security, information inadequacies and absence of standards and nominal cooperation.

Inadequate security with certain e-payment services (for example card payments) is a problem, where e-commerce enterprises are the most vulnerable. Another problem is when payments cannot be linked to the delivery of goods or products ordered. The consumer is particularly vulnerable in connection with advance payments, and e-commerce enterprises assume a risk in connection with payment following delivery. A low general awareness of security on the part of the consumer creates risks. It is important that the work commenced with advanced security for e-payment services, for example card payment, progresses further.

The market is characterised by large and dominant actors who own the infrastructure for large and small payments. Cooperation with these is necessary for actors with dependent status (for example small e-payment services enterprises and e-commerce enterprises). Advanced cooperation between the major actors, concerning among other things standards, is an important issue to reduce the administrative and technical complexity and consequently reduce costs. This would increase the incentive for e-commerce enterprises and the consumer to transfer to e-payment services. It is also important that the actors affected join forces and articulate their requirements and needs in relation to the parties with dominant market status. There is a need for increased cooperation between actors and various categories of actors.

The consumer and e-commerce enterprises have limited knowledge of what services exist, how they operate and what benefits they offer. There is a need for information regarding, among other things, practical issues concerning handling, confidence-related issues concerning security and integrity and consumer law issues in connection with domestic and international trade. One measure to increase the use of e-payment services is that the actors affected inform the consumers and e-commerce enterprises within their respective fields of responsibility.

As regards possible work on the part of the State, there are opportunities mainly within three areas: to be an active user, to monitor developments for which the respective authorities have sector responsibility and to provide information within those areas.