Examination of Witnesses (Questions 840
WEDNESDAY 10 MAY 2000
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.
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
alongnobody 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
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
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
(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.
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
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
Chairman: Thank you very much, indeed.