Select Committee on European Union Minutes of Evidence

Examination of Witnesses (Questions 820 - 839)



  820. Is it not a fact that there are several cards, some of which have been developed specifically for the Internet, going to be confusing to the ordinary man in the street or the ordinary surfer?
  (Mr Potts) The so-called new economy is a high-grade economy for the vast majority of people who want financial services, particularly those who use cards, do not want a different system when they are tapping into their PC from something they use in a restaurant or in a department store. One of the things we are concentrating on is making sure that you have a single token piece of plastic that you can then use on the Internet, if you wish, as well as using it in a physical environment. Of course there are additional services that we can add to it on the Internet. One of the pains today, as you probably know, is if you use your card on the Internet you have to re-input your details every time, we have currently on trial a Barclaycard wallet, whereby you put your details in the wallet once and then whenever you make a purchase from a retailer or across the Internet you simply have to pay for it from your wallet. Our approach is to say, how can we make it easy for our customers to use their card facilities, irrespective of whether they are buying a holiday from Lunn Poly, buying a meal in Pizza Hut or whether they are shopping in across the Internet. However, there will be some customers that are sophisticated in the Internet world and actually would be happy to have a distinct method of payment across the Internet. We need to think about catering for those as well.


  821. If I may follow up on the trader issue, evidence has been put to us that some traders do have difficulties in getting you to embrace them—this is not Barclaycard specifically—I am wondering how many a year you turn down and whether you are very rigorous, indeed. I can understand why, from a consumer's point of view, you have to protect them but equally the view has been put that some small traders have difficulty in promoting their business on the Internet because they cannot go alongside with you.
  (Mr Potts) That is a valid criticism of the industry overall. I have to say it has exercised our minds a great deal. What we have to tried to do to deal with this is take our existing process for vetting and say, "How can we make them fit for the Internet?" Just a month ago we introduced a brand new service which we called "en@ble-it", it has a little "e" at the front of enable. It is specifically tailored towards those smaller business people who want to get on the Internet and want to trade on the Internet. What we have done is introduced an assessment process which is twenty-four hours and it is particularly to deal with this issue, because it is an issue. What has happened is that the market has moved quite strongly. A number of retailers have now gone from saying, "We have done the bit of putting our details the website we now want to trade." The challenge for us has been, how can we change our processes so we can help them trade quickly. It is an example of one of the ways in which we respond.

  822. Do you have any idea of the numbers you have turned down?
  (Mr Potts) I cannot give you any figures. I can try and find some for you.

  823. It would be interesting on this point.
  (Mr Potts) Whether we can pinpoint declines in relation to the Internet I am not certain. I do not know how robust the information systems are. We could have a go at some information for you.

Lord Woolmer of Leeds

  824. Does Barclaycard offer different levels of protection in different countries? With other cards, what is the general practice of protection or is there a tendency to tender the protection to the country of the user. Can you talk us through those issues?
  (Mr Potts) It is quite a complicated question to answer. If you take the United Kingdom, several years ago I led an industry group to try and create a common approach to deal with disputes, fraud, and so on, in particular a common approach to the Consumer Credit Act. There are all sorts of practical problems with the Consumer Credit Act when it comes to credit cards. What we were able to do at that time, this was 1992/93, we were able to get some consistency across the industry in the United Kingdom as to how that would be dealt with. The belief was at that time if we were able to do that we would be able to get the law changed in a way which would not be detrimental to the consumer but more helpful to the card issuers. In practice we were not able to achieve that. What happened then was a number of members of the industry went back to their old approach and a small number retained the common approach that we had agreed at that time, including ourselves, and since then we have extended the way in which we protect our customers, by adding voluntary policies. That is the United Kingdom position. I cannot speak for every market across Europe. Generally speaking our own policy to our customers in the United Kingdom, Germany, France and Spain, where we are currently represented, is broadly the same. We will offer broadly the same consumer protection, irrespective of the legal differences from country to country. There are some differences, though, in Germany we still retain the right to charge a modest sum, the equivalent of the £25 I was talking about earlier in Deutschmarks, but we rarely apply that. It will not be long before we feel confident and will drop that. We have not yet extended our on-line charter and promise from the United Kingdom into our territories overseas but we will be considering them very soon.

  825. Why?
  (Mr Potts) Because they are less mature businesses, it has just been a question of priority in the way we expand our business. There is no reason why we should not do it and we probably will do it very soon.

  826. When you say they are not as mature, does that mean you are not able to vet the suppliers, the companies selling, as though you would in the United Kingdom or you are not able to vet the credit risk?
  (Mr Potts) It is not that. It is purely a question of timing and how we expand our business. We only opened up in Spain some 12 months ago, we have a relatively small file there at the moment, it has not come to the top of the agenda but these are now coming close to the top of the agenda. We will try to adopt a consistent policy across all of the countries that we represent. Ultimately we want the Barclaycard brand to be recognised as an international brand, in order to support that we have to have consistent policies.


  827. Before I come to Lord Paul's questions, could I follow up on one of those, my understanding, correct me if I am wrong, is the use of credit cards in Germany is only about the 19 per cent to 20 per cent mark of the population. This could be an inhibitor for United Kingdom companies trying to sell abroad in Germany on the Internet.
  (Mr Potts) The north European countries are less mature when it comes to credit cards.

Baroness O'Cathain

  828. It is extraordinary.
  (Mr Potts) For a country like Germany it is their history, remember euro-cheques, basically cheque guarantees for when you are travelling in Europe. They were very strong. They came out of northern European countries. They migrated to debit cards in Europe and debit cards are very, very strong across Europe, particularly in places like Germany. Our experience is that if we are able to offer a credit card to a German national or a French national or a Spanish national, or whoever it is, and provided you tailor it in a way which meets local requirement, the core is the same but we tailor it around the edges differently to meet the cultural and legal needs. Our experience is that the credit card is very popular and is growing in popularity. We are now either third or fourth in terms of the size of credit card portfolio in Germany.

  829. You said 19 per cent in Germany, what is it here?
  (Mr Potts) In this country the usage by adults of credit cards, that is pure credit cards, not charge cards like American Express, will be somewhere around 41 per cent, and growing, it is still relatively low compared to the USA. It is 85 per cent in the US. In the United Kingdom debit cards have taken up strongly since they were launched in 1988. Now there are more transactions by debit cards in the United Kingdom than credit card transactions, although the average purchase is much higher on credit cards and people tend to use credit cards across the Internet because they can get extra protection.

Lord Paul

  830. When you pay with Barclaycard or any different card abroad is the exchange the same or very different when it comes to billing the sterling back?
  (Mr Potts) We have an exchange rate charge, which is 2.75 per cent, we found over the years that that level of exchange rate is very acceptable to the customers because of the value that we create, the ease of use of the credit card versus travellers cheques, the hassle of the currency, the risk of losing currency, plus the protection of the credit card. We found our customers are very responsive and happy to pay a surcharge because of the extra value.

  831. That is not my question, is it competitive compared to other cards?
  (Mr Potts) It varies, every visa issuer can decide how they price their cards, whatever services they have.

  832. So you can have a great difference?
  (Mr Potts) Yes, indeed.

  Lord Paul: That is all.

Lord Faulkner of Worcester

  833. Could I ask about your plans for an Ombudsman?
  (Mr Potts) Yes. I cannot take any credit for this because one of my colleagues in Barclays made the suggestion. My understanding is that DG XV have accepted the idea of an Ombudsman or the equivalent country by country and are working out the way the European-wide network are dealing with dispute resolution. I understand it is encapsulated in paperwork now and individual countries are looking at how they can structure this.

  834. It seems a bit slow, though.
  (Mr Potts) We were delighted that the idea was accepted and pleased to hear it is making progress. I do not know how it compares with the speed of the introduction of other initiatives across Europe.

  Chairman: They vary.

Lord Faulkner of Worcester

  835. What do you think the Ombudsman scheme will give to your customers which you do not already give now?
  (Mr Potts) In our case it will not add a great deal, frankly, we are underwriting our customers at the moment. What it will do is act as a very important release valve for our customers. There are always situations—they are very few, I am happy to say—where we cannot resolve disputes with customers to their satisfaction and in those circumstances we will always suggest that they take their issue to the Ombudsman. There is an independent review by the Ombudsman. I think as e-commerce grows for us it will be less important. Practice varies from card company to card company. I imagine that there will be other card companies where a harder line is taken in terms of dispute resolution, in which case the Ombudsman is rather important.

Lord Woolmer of Leeds

  836. Can I return to something you said earlier on, it clashes with something in my mind from earlier evidence. Take this point about fraud or loss to you on e-commerce business compared to non-e-commerce business. If you take as a measure the loss to you on a turnover business how does e-commerce business compare to non-e-commerce business?
  (Mr Potts) I am in some difficulty in giving you a complete answer to that, the reason is there is no accurate method of measuring e-commerce turnover at the moment. The reason is very straightforward, most retailers are not e-commerce only, they trade in a physical world as well as an e-commerce world. At the moment we do not have an industry method of identifying what is a genuine e-commerce transaction. We will have that from March next year.

  837. I am surprised you have not assessed that risk.
  (Mr Potts) We can assess the risk. I can partially answer your question. What I cannot tell you is how much turnover we have on e-commerce. We are building a system so we can do that very shortly.

  838. What is your best estimate?
  (Mr Potts) The best estimate, I can give you an industry estimate in the United Kingdom, is something like 2 per cent of card traffic is e-commerce traffic. For Barclaycard I can give you a pretty good estimate of what our fraud losses are.

  839. As best as you can?
  (Mr Potts) One per cent.

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