The pandemic has forced an unprecedented surge in companies selling online. But, even in the ‘single’ European market, differences in regulation make their ecommerce journey a painful one. Stripe’s Ellen Moeller is determined to make it easier for them.
Ask any merchant, anywhere in the world, for their wish list for digital payments and you’ll get the same, straightforward answer: secure, easy and compliant. Unfortunately, that level of harmonisation is far from the reality, with a tangled web of differing methods and complex and fragmented regulations existing between continents and countries.
Even attempts to level up the playing field, such as the European Banking Authority’s strong customer authentication (SCA) legislation, has been beset by delays and differences ahead of its intended implementation at the end of 2020.
Being able to successfully navigate this maze has never been more important to businesses globally as the COVID-19 pandemic causes ecommerce to skyrocket. And it’s just this opportunity that San Francisco-based digital payments company Stripe is intent on investing in.
Earlier this year, the company raised an additional US$600million from investors in an extension of a Series G funding round to further develop its platform and services. To achieve this, Stripe is advancing its software functionality to simplify online business; accelerating its geographic expansion (it now operates in 42 countries, including 29 in Europe, with Bulgaria, Cyprus, the Czech Republic, Malta and Romania the latest to be added to the list); as well as pursuing strategic initiatives and acquisitions.
And, so far in 2020, it has added leading firms Caviar, Coupa, Just Eat, Keap, Lightspeed, Mattel, NBC, Paid and Zoom to its customer base, which already includes partnerships with global brands such as Barclays, HSBC, Citibank, Klarna, Visa, Mastercard and Cartes Bancaires.
Ellen Moeller, who heads Stripe’s partnership team for Europe, the Middle East and Africa (EMEA), says it has also seen record demand for its services in her territories, with the pandemic supercharging the pace of change.
“Between March and June, at the height of lockdown, more than 100,000 new businesses came online with us, which is a pretty incredible number,” she explains. “A lot of those businesses might have come online a few years from now, but the pandemic has accelerated their need. For many, that was just survival mode – they need to sell their product, they need to tap into a market, and it’s the only way to do that. We’ve seen trends that may have taken years to come to fruition, being compressed into a three – or six-month period.”
But, despite the huge upsurge in ecommerce, all is not altogether rosy, as is underscored by a white paper, co-authored by Stripe, which was published earlier this year. Explaining the rationale behind the report, Moeller says Stripe asked business leaders across Europe what was preventing them from expanding internationally.
“We really want to be an enabler of global trade, and so it’s important for us to understand, from a user perspective, what’s prohibiting that from happening,” says Moeller.
“Overwhelmingly, the response was that regulation is a huge component. And it’s not just regulation, but the complexity of it, because, even in Europe, which, from the outside in, may look like it’s harmonised – we’re talking about a single currency and a single regulator in many cases – is actually not harmonised across the region. And regulation is certainly not harmonised across the world.
“So, for a business, whether it’s trying to sell software or t-shirts, to have to suddenly become a regulatory expert across VAT, payments, identity, privacy, you name it, is a huge barrier,” says Moeller.
“All the businesses we talked to said that in some respects that was prohibiting their ability to sell into more markets, while a huge majority said they would sell in many more markets if they had an easier way to navigate that regulation.”
For example, as part of the revised Payments Services Directive (PSD2), which is aimed at reducing fraud and making online payments more secure within a more competitive payments environment, SCA will mean more than 300 million Europeans will soon need to confirm their identity for the majority of their online purchases using two of the following: something they know (such as a password), something they possess (such as a phone), or something they are (such as a fingerprint).
And the penalty for failing to comply will simply be that the payment will be declined, an obviously undesirable outcome for any business.
Regulatory war chest
Moeller says technology companies like Stripe now have a pivotal role to play in providing the tools to enable businesses to cope with this kind of added regulation, a fact evidenced by its acquisition, last year, of Dublin-based tech firm Touchtech Payments, which provides SCA-ready authentication software. She points to the added layers of difficulties, caused by not only the lack of harmonisation around the regulations, but also the lack of synchronicity in their introduction and enforcement, which create a perilous minefield for businesses to cross.
Advancing her argument, Moeller says: “When I look at something like SCA, top of mind for Stripe, as a company that plays in the payments space, was a statement from the European Commission saying it is going to be enforced by the end of this year.
“But if you look at the local regulators, country by country across Europe, they’re implementing and enforcing that regulation very differently. So, in the UK, for example, it’s being delayed, in France you have some exceptions. That becomes very difficult for an online business to navigate. How do they implement that regulation, even when it’s harmonised, even when they understand how the rules are being enforced?
“We are going to need a lot more investment in that space in order to help accelerate global economic trade and that will be a critical component of how we actually recover from this pandemic. That’s where Stripe and technology players can really come in and help to support them.”
It’s just not forthcoming regulatory changes that cause headaches. Local payment schemes vary hugely across the world, raising multiple conversion issues.
Moeller says: “If you look at the Netherlands, Germany and Belgium, they share a border but everyone’s paying differently in all of those markets, especially if we look online. In the Netherlands, you’re paying with iDEAL, in Germany you may want to pay with SOFORT, in Belgium maybe you want to pay with Bancontact, and that’s a really complex thing, if you’re a Hong Kong merchant, for example, wanting to sell into that market to navigate.
“Now that they’re coming online and selling across the world, how do we make sure that we can help these merchants tap into the customer base the right way, and the way that converts as seamlessly as possible for them? That’s another area of opportunity where we’ve seen a lot of demand.”
Moeller says the barriers to trade identified in Stripe’s white paper have reinforced its mission.
“We really felt and understood the pain of those businesses. And we overwhelmingly heard what we had hypothesised would be the case, which is that this is a really complex area, which businesses are craving technology to help them navigate. That helps us focus.
“At Stripe, we see ourselves as being able to remove that complexity and build the technology, software and underlying partnerships with banks or other institutions for fintechs and other types of company to just plug into, so that they don’t have to become experts.”
Accepting that one consequence of the upward surge in global ecommerce is that regulatory complexities will exist between trading nations, with Brexit certainly a major new contributor to that, she sees opportunities for companies like Stripe to, as she puts it, ‘smooth bumps in the road’.
“Players in the regtech space can help businesses by navigating those complexities, work closely with regulators and regulated institutions, as Stripe does, and become the experts.”