- Visa Token Service, which enables secure and convenient mobile payments, is live in five European markets, with seven more in the pipeline
- European consumers currently spending an average of €9 in face-to-face transactions when they use their mobile device to pay
- More than 1.2 million European merchants offer contactless point-of-sale, driving uptake in mobile payments
At the launch of its new Innovation Center in London today, Visa Inc. (NYSE: V) announced that, by the end of this year, more than 12 European countries are adopting the Visa Token Service, a new technology that makes mobile and online payments more secure and convenient by replacing the consumer account information with a digital identifier.
The technology is already supporting mobile payment schemes in 27 countries worldwide, including in France, Ireland, Poland, Switzerland and the UK, with more than 1,300 financial institution partners. Visa is working with its clients and partners to extend the use of the technology to more countries and to online payments.
Pioneered by Visa in 2014, the Visa Token Service is the technology that underpins popular mobile payment services including Apple Pay and Android Pay, providing consumers a secure way to load and access their payment account on a mobile device. The technology sits at the heart of Visa’s IoT (Internet of Things) vision, enabling secure and convenient commerce on any connected device, such as phones, tablets, wearable devices, even automobiles and appliances.
Sandra Alzetta, Executive Director Digital Solutions for Visa:
“Since 2015, we have seen people throughout Europe embrace mobile payments. Next on Visa’s horizon is expanding our token service to give merchants an easy way to safely store the customer account information they keep on file and enabling secure commerce with a broad range of connected devices.”
Key Growth Drivers for Mobile Payments in Europe
Security, convenience, and an increase of retail locations equipped with contactless payment terminals are key factors driving the adoption of mobile payments across Europe. Visa’s token service technology is providing consumers with peace of mind when shopping with mobile devices, offering a seamless purchasing experience for every day purchases from commuting to their morning coffee and entertainment. In addition, European merchants are increasingly installing new technology that supports payments with both cards and mobile (NFC) devices.
- In Europe, the top five popular merchant categories for mobile payments are restaurants, supermarkets, transit, convenience food and drink, and leisure and entertainment.
- When using their mobile device to make a purchase, European shoppers spend an average of €9 in store and €41 online.
- When travelling abroad, Europeans have used their mobile device to make purchases in 91 countries around the world, demonstrating that people feel safe and secure using their smartphones or tablets when shopping in another country.
- There are more than 1.2 million merchants in Europe that accept contactless payments by cards and mobile devices[i] in store, driving more than five billion contactless purchases by European Visa account holders[ii]. This represents 32% of all Visa-processed transactions at physical retail locations[iii].
Enabling Internet of Things (IoT) Commerce
Visa’s Token Service and ability to remove sensitive consumer payment account information from purchases in digital channels is foundational for secure commerce with a broad range of (IoT) connected devices, from a watch or ring, to an appliance or car.
Visa’s global collaboration with IBM, announced last week at the opening of IBMs new IoT Watson Research Center in Munich, is designed to do just that and is rooted in a shared vision and belief that we can securely embed payments and commerce into many of the 20 billion connected devices estimated to be in the global economy by 2020[iv].
As part of the collaboration between the two companies, IBM’s Watson IoT clients, we will make the Visa Token Service accessible through a network of token service providers (TSPs) as part of our Visa Ready partnership program.
The Hidden Costs of International E-commerce
By Gavan Smythe, Managing Director, iCompareFX
Taking a business globally can be an attractive prospect, potentially targeting markets with fewer competitors, taking advantage of a larger consumer base and even gaining access to cost-effective manufacturing resources.
However, it’s not as simple as just shipping product overseas. Successful international traders conduct extensive market research, understanding each region’s barriers to entry – whether it’s regulations around communication and marketing, finding key contacts in supply chain management or navigating legal and cultural restrictions.
This also means identifying the hidden costs of international trading, which threaten the bottom line of businesses.
The price of peace of mind
Online trading isn’t without its complications. Buying online means handing over confidential bank or card details and, without the right protection in place, it can leave consumers open to theft and fraud.
That’s why e-commerce payment services include a gateway model, which secures transactions by encrypting the cardholder’s details and managing the payment process for the merchant.
However, like any specialist service, merchants pay to keep this sensitive data safe. Gateway fees are typically calculated as a percentage of the transaction amount. And while this payment model is useful for SMEs – helping them efficiently scale – it represents an additional cost that many business owners don’t account for.
Those tempted to simply roll out the cheapest service risk damaging their reputation by potentially being an unsafe seller and one which undervalues its customers. This will eventually impact revenue, as customers look elsewhere, and merchants navigate the costly time spent ironing out problems with insecure payments.
When it comes to choosing a payment gateway service, key considerations should include working with a provider which operates across the same regions and checking contract terms. Some providers may charge set-up fees, monthly subscription fees or implement a blanket charge if a minimum volume of transactions isn’t met.
Merchants should also consider whether to use a direct or indirect payment gateway. While direct payment gateways allow consistent branding with customised design and copy, it may cost extra to integrate the service with an existing website.
Indirect gateways take users away to a separate payment portal on a different page. This is cost-effective to install and can appear more secure to users as they may be using a familiar and trusted payment gateway brand
Calculating conversion fees
As a business owner, payment gateway solution providers charge a number of percentage fees. While for sellers in domestic markets the fee structure can be quite simple, for online sellers in overseas markets, the fee structure becomes complex.
For example, as an international online seller, you can be subject to additional costs for processing international cards, plus additional currency conversion costs back to your business’ home currency.
In some circumstances, this can cost up to 9 percent of your sale revenue. A business has the choice of passing these costs on to the customer or to reduce its profit margin in international markets.
Businesses shouldn’t rush when it comes to choosing a provider. Taking the time to review and compare what’s out there puts them in a stronger position to choose the perfect match.
Providers vary in their offerings, from the regions they operate in, to their fees and exchange rates and even transfer speeds. Those who value trust and transparency may be willing to pay slightly higher to work with a provider which offers exceptional customer service standards, helping them navigate the currency exchange process.
For those moving into multiple markets, it’s worth using a comparison service or tool to make sure they’re partnering with the right provider for each currency pair and region, as it’s unlikely a single provider will offer a blanket ‘best solution’ across the global market.
The role of multi-currency accounts
Having looked at the impact of currency conversion fees, what can businesses do to mitigate these costly charges when it comes to trading in an increasing number of currencies?
Opening a multi-currency account allows businesses to access the speed and affordable conversion costs needed to make the most of international trading. They allow businesses to access unique local banking details in foreign countries and all balances and transfer controls are accessible within a single dashboard.
Not only are the conversion fees associated with these accounts much lower compared with transferring currencies between bank accounts but it’s also quick and efficient – allowing businesses to access funds almost instantly and pass this convenience on to customers.
Specialist money transfer companies that offer multi-currency account solutions offer these services at no monthly cost. Simple and low-cost fee structures are applied on currency conversion and outgoing funds. And incoming receipts of money transfers don’t cost a penny.
Not all multi-currency account solution providers offer access to the same currencies. Furthermore, not all payment gateways offer support for payouts in multiple currencies. Businesses should conduct an assessment of current and future customer and supplier locations to choose the most appropriate solution provider.
Conducting an internal risk assessment helps businesses decide which multi-currency account makes sense for them, based on key requirements, like the number of supported currencies, target regions, potential overdraft facilities and ease of transfers.
Managing international suppliers
In many industries, international e-commerce is not as simple as just sending products to different regions. Logistics and legal regulations across the world mean businesses are often required to work with local specialists to deliver their service or offering.
This may mean working with local manufacturers to produce products in each region or simply partnering with local marketing, PR or advertising professionals to create culturally sensitive brand awareness in the native language.
In these cases, the business becomes the customer. They are required to make payments in multiple currencies as they manage their global operations.
For example, UK bank accounts charge relatively large fees to make payments in foreign currencies and these soon add up when running operations around the world.
This is where multi-currency accounts again prove fruitful. Not only do they allow businesses to hold multiple currencies – which is ideal for sellers – but they can also send money to other accounts with minimal fees if they’re in the same currency.
Paying suppliers in the same region as their customer base can remove the double currency conversion by receiving payment gateway payouts in the foreign currency and paying out of the multi-currency account in the same currency. No currency conversion is necessary in this scenario.
Businesses able to identify all these costs and admin fees up-front will be best placed to get the most value from the research and comparison stage when comparing providers.
Ultimately, they’ll achieve the lowest possible fees for each market, currency and transaction.
Digital Euro Could Spur Major Breakthrough Towards More Liberal EU Payments Market, Expert Says
The recent talks about a possible digital version of euro have raised discussions throughout the industry. According to Marius Galdikas, CEO at ConnectPay, it could greatly liberalize the market in terms of lessening barriers for market entry and present more opportunities for accelerating its growth.
With the ever-increasing digitalization transforming the modern world, the European Central Bank (ECB) has raised the idea of launching a digital euro, which would assume an electronic form of currency accessible to citizens and companies alike. According to Marius Galdikas, CEO at ConnectPay, it seems like a high-potential bearing solution, which could greatly liberalize the market, reduce entry barriers for new companies, as well as drive further digitization.
The European Central Bank has been weighing the pros and cons of the digital version of Euro for a while now. The idea is based on an insight that while there is an array of choices for retail payments, e.g. cash or payment cards, the market lacks a unifying digital currency, which could facilitate daily transactions, was easy to use, and would provide cost-free access to a reliable means of payment accepted throughout the entire eurozone.
“At the moment, digital euro seems to be bringing a plethora of benefits to the table, without waiving the inherent properties of cash,” said Marius Galdikas. “It appeals to the consumers’ need to go cashless, largely influenced by the coronavirus situation, and gives them more choices about how to pay. By no means will it replace actual banknotes—ECB emphasized this as well—but rather present a supplementary-to-cash solution that corresponds with the rapid levels of digitalization. It could contribute to a stronger Eurozone’s stance in the global payments market, too.”
Galdikas noted that while it offers quite a few benefits for the everyday consumer, the digital euro could be a game-changer for the fintech sector as well. According to him, having a digitalized version of the currency could potentially eliminate the need for middle-men. This would result in fewer barriers for new ventures to enter the market.
“In order to gain access to the Eurozone, first it is necessary to acquire a credit institution license. Only then it can join TARGET2 – Eurozone’s settlement system, which processes large-value euro payments in real-time. However, such licenses are usually issued to FIs that focus on collecting deposits or lending credit.”
“Consequently, it is much harder for up-and-coming fintechs to acquire the same licenses, as they have a more innovation-driven approach, hence, want to offer novel products,” continued Galdikas. “This leads to dealing with a fair amount of intricacies in order to ensure all-round compliance in the banking sector. Digital euro could restructure the current chain of authority and shape it to be more strategic, streamlining bureaucratic procedures and leaving fewer hoops to jump through.”
Inevitably, this would prep the industry to be more welcoming towards greater innovation, as fewer barriers would pave the way for new fintechs, looking to present novel solutions.
Currently, the idea of the digital euro launch is in the analysis stage. Over the next six months, the Frankfurt institution will be carrying out a series of experiments exploring risks and operational challenges, as well as undergoing a three-month public consultation, launched mid-October.
Although currently the move to digital Euro launch is predicted to happen over the next 2 to 4 years, the impact it would have on the European Union payments market makes it a highly anticipated solution.
Tax administrations around the world were already going digital. The pandemic has only accelerated the trend.
By Emine Constantin, Global Head of Accoutning and Tax at TMF Group.
Why do tax administrations choose to go digital?
Among the many reasons, the most important one is the pressure to perform. Most governments complain that the tax revenues they collect are significantly lower than what should be collected. To increase the collection rate, tax authorities need better insight and access to detailed information.
Another key reason for tax digitisation is the need to address cross-border challenges and the issue of value creation.
“Where is the right place to tax cross-border transactions – is it the country of residence or the country of consumption?” has been a topic of discussion for some time. Adding another level of complexity, many cross-border transactions take place online. For tax authorities, the challenge is the lack of information about the users and the amount of payments made for the activities facilitated by the online platforms. Without such data, identifying the place of consumption is very challenging
Where is tax digitisation at?
Most tax administrations are currently implementing e-reporting (enabling the submission of tax information in an electronic format) and e-matching (correlating the data received from different sources: e.g. both customers and vendors submit information on sale and purchases and the two sources of information are checked and agreed to identify discrepancies). Through e-reporting, tax administrations are able to:
- Obtain real-time or near-real-time data submissions. Instead of waiting until the end of the month for summary tax information, each invoice is electronically communicated to tax authorities when it’s issued. This moves compliance upstream. Tax assessments are supported in real-time or close to it, instead of assessing transactions that have happened in the past. TMF Group’s research has found that 24% of countries surveyed globally require companies to issue tax invoices using technology and send them to tax authorities electronically, without any form of manual intervention. The percentage gets higher in the Americas (where more than 50% of countries have such requirements) and in APAC (where 36% of countries have no adopted this method).
- Share best practices and boost cooperation with other tax authorities. According to a recent OECD report, 15 of 16 tax authorities surveyed use data analytics to drive audit case selection. With national implementations of BEPS (Base Erosion and Profit Shifting) and global tracking and monitoring, digital is a new focal point for the OECD. Tax administrators learned the value of such collaboration from previous projects and are putting that experience to good use by sharing approaches and leading practices.
- Increase the coverage of the tax audit. Tax authorities request more and more data and more and more details during tax audits. Such requirements are not limited to technology companies that may host a platform where their users trade with one another. In some cases, companies have been asked to provide data files. In others, they have even been asked to install tax authority software on their systems.
When it comes to digitisation, it’s important to understand local and regional trends because the level of maturity can be quite different.
In Europe, countries are increasingly adopting SAF-T (Standard Audit File for Tax) submission requirements — long described as the closest to a consistent approach for managing tax audits.
Portugal, France, the Netherlands and Luxembourg are just some of the countries where SAF-T submission is now mandatory.
Digitisation brings benefits but also challenges for companies. In Spain, VAT refunds are suspended until SII (Immediate Supply of Information) submission is fully compliant. In the Czech Republic, the introduction of VAT control statements has led to many formal and informal queries by tax authorities with a required response time of 5 working days. All these requests put pressure on taxpayers to provide accurate tax data to avoid further enquiries.
LATAM is the most mature region in terms of tax digitisation. Latin American countries have adopted a “layering” approach, splitting tax and accounting data into “slices,” each with its own submission schedule, scope and format. Brazil is one of the most advanced countries in this respect. Virtually all accounting and tax data is communicated electronically.
In APAC, China and India have also started their journey towards fully-fledged electronic reporting.
A positive shift
Digitisation makes the tax journey easier, not only for the tax authorities but also for the taxpayer. One obvious benefit is the reduced tax return filing burden. For example in Poland, the submission of the VAT return was replaced by the SAF-T submission.
Based on the amount of data collected, tax authorities in Spain and Australia have created virtual online assistants to help answer tax questions. In India, the authorities are looking at pre-populating the GST return, reducing the amount of time that taxpayers spend preparing it.
Implications for companies
When responding to the electronic requirements of tax authorities, companies have some key considerations.
Data requirements – what will companies need to report, and how? What we see in practice is that:
- Data sits in multiple places and companies need to either aggregate it automatically or reconcile it before extracting it manually.
- Data is inputted manually and – as such – is prone to errors, inaccuracies and incompatibilities.
- Some of the data needs to be manually adjusted outside the normal transactional cycle (e.g. output VAT on goods provided free of charge)
If a company faces any of the situations described above, the challenge will be to aggregate and validate the data before reporting it.
Processes – do current processes allow companies to collect all data that is needed? Often, the data collection processes do not allow for consistency or for storage of all relevant data. Processes might need to be adjusted to make sure that the right level of data is in place.
Technology – are the company’s current systems appropriate for reporting purposes? Existing software might not allow for accounting records to be digitally linked.
Tax reporting process – is the tax reporting process fit for purpose? As described above, tax resources need to be moved to the front-end of the accounting process: data needs to be accurate when entered into the system.
Companies that wish to mitigate these problems should follow these steps:
- Understand local requirements.
- Identify the required data sources and strive for a global standard. Looking for local solutions will not help you deal with the digitised world.
- Create a library of tests – it’s believed that 70% to 80% of national revenue authority requirements are similar.
- Prepare to respond to tax queries – as tax authority scrutiny and testing moves into real or near-real time, so must the response.
Digitisation is very much a global trend, more and more countries are introducing it, and it’s seen as a safe solution to reduce the tax gap. In the short-term digitisation may bring complexity, because it will affect how a company’s accounting and tax functions are organised. But in the long term, once processes are automated, it will save companies time and effort – and allow them to stay ahead of the demands of tax authorities.
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