Select Committee on European Union Minutes of Evidence

Examination of Witnesses (Questions 840 - 851)



  840. One per cent overall. Do you think e-commerce business is no more than that?
  (Mr Potts) Yes. I know that experience in the other countries and in other card players is different. I have heard many CEOs from other card businesses say that their experience is much, much worse than that. It causes me to think why it should be, I actually do not know why. Some of it is to do with the fact that we have developed a very strong fraud profiling system, whereby we use knowledge-based systems and neural net systems to identify suspicious transactions on customers accounts. I believe that we are faster at identifying those situations and dealing with them than most, if not all, of our competitors. Secondly, we put a lot of effort into chip cards in the United Kingdom, which is a very strong signal to the fraudster that we take fraud seriously and may well put off organised fraudsters in trying to tackle us with Internet commerce. I do not wholly understand why our current experience is so much better.

  841. How do chips in cards protect you against fraud on the Internet?
  (Mr Potts) Today they do not. The fact that we are leading in the United Kingdom is a very strong signal to organised crime that we take fraud very, very seriously. Fraudsters will tend to go to the softest target and it may well be there is a knock-on effect when it comes to those who want to do Internet fraud. It supposition, I am afraid I do not know. Ultimately chip cards can be one way of improving security across the Internet by using it in conjunction with PCs for recognition.

Viscount Brookeborough

  842. You seem to have your own code, it is self-regulation really. You set your own standards. Does legislation vary to such an extent throughout the world that you would like to see legislation come in to help you worldwide? Do you think the credit card companies, and so on, within their own business control it?
  (Mr Potts) I think, first of all, particularly in the area of e-commerce, because of its nature, because it is still relatively immature and growing very quickly, because actually as soon as you think you understood it some new development comes along—nobody would use a WAP telephone eighteen months ago and now they are all the rage. My concern is, strong legislation would inhibit business which would in turn inhibit them dealing with their own customers. I am very much in favour of the light touch approach to this. The other side of the coin is we are very concerned, as we explained in our written evidence, about the knowledge that in Brussels people are looking at the approach in the United Kingdom to protection around Section 75 of the Consumer Credit Act and considering whether they should extend that across Europe. This whole area was developed at the time when credit cards were in their infancy and it was created for hire purchase situations, a straight forward situation when you bought furniture. It was not really designed for credit cards. We have spent many years trying to put a plaster across this piece of legislation and we would be very concerned, indeed, if we were asked to extend a level of consumer protection. We accept it is here in the United Kingdom and it is one of those things we have to live with, but to extend it across Europe we would find extremely difficult to manage, for all sorts of practical reasons. We think it would shift the balance too far away from business towards the consumer. I heard the expression caveat emptor used in the previous discussion, I still believe the consumer has a degree of responsibility.

  843. On the use of the Internet for e-commerce, will you have a different charge to the e-commerce business for the use of a card as compared with the practical walking into the shop charge you are going to encourage.
  (Mr Potts) Are you referring to consumers?

  844. When I make a purchase it is cash, the business that I make the purchase from pays you a charge, will there be a differentiation between that which is done on e-commerce?
  (Mr Potts) Maybe in some circumstances the risk is higher but the biggest risk we face is in situations where there is deferred delivery of the goods or service, the card holder pays but does not get immediate delivery. In the physical world we price that at a higher level with travel agents, who carry a particular risk, with suppliers of furniture we tend to price more highly. The same situation would apply in the Internet. The other area which will be different is there are many new opportunities for us to supply new services to retailers on the Internet around a whole arena of introducing customers to them, which saves a lot of marketing costs for them and therefore there is going to be some sharing of that extra value which could lead to differential pricing.

  845. On exchange rates, I live on the border with the Irish Republic, where I used my card, and when they swiped it the first thing that came out was the exchange rate. I know how many pounds it was for the number of punts I was being charged. Is that, first of all, available with Barclaycard? Secondly, can you make it available on the Net so that if I was to buy something on the Net which was in a different currency that I would know at the point of purchase what the exchange rate was?
  (Mr Potts) The answer to the first question is that is a service which some retailers offer, and we offer that as well to those retailers that want to use it. The answer to your second question is we already give this information on our website. We freely give all of the information about our pricing and our customers are aware of what the charges are. We have relatively few charges.

  846. Does it appear on the site from which I am buying the product?
  (Mr Potts) It will not appear from that site. I am going to ask Jennifer to comment about whether that technology is possible.
  (Ms Allerton) It is up to the merchant to decide whether he is going to do that. The merchant is the bearer of the cost, so it is up to him whether he is going to show that to the consumer.

  847. He can produce the exchange rate.
  (Ms Allerton) If he chooses to.

Baroness O'Cathain

  848. This is a valid point of relevance for people who use their Barclaycard on business. You go abroad, you know you pick up bills for business and have you to wait until your statement comes in five or six weeks later to see the sterling conversion rate before you can get your expenses back, as we did on our recent trip to the US.
  (Mr Potts) There is a solution for you, a corporate card which many companies will use increasingly. You will find Government is using it, although it is called something different, in Government. It is used at the moment and we have contract arrangements with the Treasury, DTI and around eight or nine other Government departments. It is a much slicker method. You do not have to pay anything out yourself, it automatically debits the department.

  849. It would be a good idea if you got in touch with the House of Lords.
  (Mr Potts) I am pleased to hear we are doing some business.


  850. We have a debate on providing better resources and improving our efficiency in the future.
  (Mr Potts) It is a wonderful opportunity to drive out the costs of administering what is a complex area.

  851. Thank you. Is there anything further you would like to say about the European angle. I take a note of your point on Section 75.
  (Mr Potts) We are very committed to expanding in Europe ourselves, we see this as an enormous opportunity. Irrespective of whether the United Kingdom is in or out of the euro there are wonderful opportunities for Barclaycard. We are favour of anything that helps, in particular e-commerce. e-Commerce is a wonderful opportunity for us and we are excited about Europe combined with e-Commerce.

  Chairman: Thank you very much, indeed.

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