The EBA recently announced that it would be pursuing a new set of regulations revolving around online shopping, in the hopes that, when implemented, consumers who shop online will feel much more confident regarding their own financial security.
Despite extolling the benefits these new regulations would bring, retailers and other groups quickly came forward with their fears that the unnecessary piece of legislation would bring the growing online commerce sector to a grinding halt.
The proposed regulations, essentially, would force extra security measures on consumers spending over £8.50 online. These shoppers would, for example, be required to type in a personal password or code or even use a peripheral card reading device in order to proceed through the final step of the checkout phase. Many organisations have already argued that by doing so, the EU would be placing a superfluous roadblock in the increasingly smooth customer journey. Visa has gone as far as referring to the potential consequences as “catastrophic.”
Omnico has conducted extensive research into online retail. A recent survey, as part of its Retail Gap Barometer found that 74 per cent of consumers feel that speed and convenience are among their top priorities when shopping both online and in-store. The only way for retailers to provide this to their customers is to build a seamless customer journey. On the high street, retailers are often slowed down in this pursuit by the presence of excessive queues at the counter. While this has never been an issue for online retailers (barring a few retailers who have experienced overloaded servers in previous busy periods), the EU’s proposed legislation would essentially be introducing queues to the realm of online retail, an environment in which they are neither necessary nor desired by any party involved.
The first and likely most visible consequence of the proposed regulations will be the huge surge in the number of shoppers abandoning their online baskets before completing a purchase. What will the final tally in lost sales be? According to research by Visa, the EU regulations would end up affecting €6 billion of transactions across the 28 EU member states.
The impact of these regulations won’t be felt evenly across Europe, however. The consequences will undoubtedly be greatest here in the UK, where 63 per cent of consumers claim to regularly do their shopping online. In comparison, an average of 51 per cent of consumers across the whole of Europe regularly shop online. In a recent Omnico survey, which received responses from across the UK, over half of the respondents said they would abandon their purchases if an extra step were added to the checkout process.
Omnico’s Retail Gap Barometer research shows that consumers are increasingly turning to their smartphones when it comes to shopping during busy seasonal periods like Black Friday, Cyber Monday and in the run-up to Christmas in order to gain maximum stock-access and fulfilment options while also avoiding crowds.
The overall value of these busy shopping periods to UK retailers has greatly increased as well. This year UK shoppers spent over £2bn on their Visa cards on Black Friday, 13 per cent more than last year. Half the spending happened online and contactless payments picked up, across all age groups, according to Visa. Barclaycard, which processes almost half of all credit and debit card transactions in the UK, said payment transactions were 6 per cent higher than last year’s Black Friday.
Looking ahead to the upcoming Christmas shopping season – the only period of the year more profitable for retailers than Black Friday – consumers are again making greater use of their smartphones and other devices to cross off their shopping lists. Omnico’s Retail Gap Barometer revealed that 37 per cent of UK consumers will be taking advantage of online shopping.
The proposed regulations, however, would effectively disable the majority of one-click shopping and automatic app payments. With shoppers making increasing use of online shopping, particularly during busy periods such as Christmas, retailers can expect a serious loss in sales from online basket abandonment if these regulations come into effect.
Mel Taylor, CEO, Omnico
Image source: Shutterstock/Kaspars Grinvalds