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The Green Sheet Online Edition

February 08, 2016 • Issue 16:02:01

The autobahnen, autoroutes and motorways of European payments

By Christoph Tutsch
Onpex GmbH

If you set off from Luxembourg City and drove north, it would take you five hours to reach Amsterdam in the Netherlands. On the way, you'd pass through Belgium and, if you wanted, you could have a quick detour into Germany. Leave Houston, Texas, and drive north and, provided you stick to speed limits, five hours later you will still be in the Lone Star State.

Just like our cars, Europe might seem more compact than the United States, but it is a complicated market for anyone seeking to access it. Yet it is also a lucrative market. According to the Centre for Retail Research, e-commerce is growing faster in the European Union than in the United States. Smart U.S. merchants will want to take advantage of this.

In this article, I focus on the three biggest markets in the European Union: France, Germany and the United Kingdom. I'll look at the trends and idiosyncrasies of each and consider what merchants, and others who want to trade in these markets, need to know to operate successfully and in compliance with local regulations.

The United Kingdom

One common assumption made about cross-border commerce in the EU is that all the member states use the same currency – the euro. Unfortunately, this is not the case. The EU has 28 members; nine of them, including the UK, don't use the euro.

British use of the euro (and, indeed, membership in the EU) is a controversial topic in the UK and, for the foreseeable future it will retain the pound as its currency. So the first challenge for anyone wanting to do business with the "Big Three" of European commerce is that they will have to deal with both the pound and the euro.

With 48 million online shoppers in the UK, 48 percent of whom have made a purchase overseas, it's a lucrative market where purchasing cross-border is rapidly becoming the norm. If you are purchasing goods from the UK for export, then VAT (sales tax) isn't an issue and you will be exempt from it, which is, of course, good news.

However, if you are selling goods to the UK, VAT becomes far more complex. Under UK law, you must become a designated Importer of Record and will be liable to pay VAT (currently 20 percent of the sales price, although there are exemptions).

The complexity of UK VAT law can be off-putting for U.S. merchants who want to trade with the UK. There is the possibility of working with a UK-based import agent who can handle some of the red tape for you, but if you are serious about trading with the UK, you need to make sure your payment platform keeps you compliant with VAT laws.

Trading standards laws (consumer rights) are standardized across the EU and are more weighted toward the consumer than in the United States. However, if you are selling from the United States to the UK (and other EU countries) you are bound by U.S. consumer legislation, not EU legislation, so that is one less thing to worry about.

One final thing to note: in the UK, alternative payment methods are popular. According to Ekos Global Ltd., 20 percent of UK consumers regularly use PayPal. So merchants looking to trade with the UK market need to be able to accept alternative payment methods, as well as card payments.


Germany ranks second, after the UK, for online commerce in the EU and is, again, a lucrative market for the United States. Germany's currency is the euro, and Germany was one of the key drivers and supporters of the euro project. Despite recent weaknesses and controversies with the euro and Eurozone, Germany continues to support the single currency.

The first issue to consider is language. While English is widely spoken in Germany, especially by younger people, if you are serious about doing business with this tech-savvy country, make sure you speak their language. Not only is it good business sense to do this, it also demonstrates a commitment and even respect. Competitors who offer German language browsing and checkout options will be stealing a march on you if your company doesn't offer it. It's worth remembering that there are around 5 million native German speakers in the United States, too.

Germany, as an EU country, is subject to the same VAT regulations as the UK. German VAT is, for most items 19 percent and, like the UK, there are some exemptions. However, like the UK, it is also a complex system, even for those familiar with it. Failure to comply will result in financial penalties.

Managing this is, again, a matter for attorneys and making sure that whatever payment platform or software you use keeps you compliant.

In terms of payment preferences, German consumers are not as active with debit or credit cards. Far more popular are offline bank transfers like wires on open invoice or direct debits (favored by 46 percent of consumers) and online payment services (used by 29 percent of consumers) such as PayPal and GiroPay, according to Ekos.

This is a critical piece of intelligence for anyone looking to attract consumers in Germany. If you are offering only credit and debit card options, you are turning away over 90 percent of your potential customers.


France is the third biggest e-commerce market in Europe, and our advice around VAT in France is the same as it is for Germany and the UK (indeed, everywhere in the EU). The general rate of VAT in France is 20 percent, although there are variations for a number of goods.

It is worth pointing out that EU VAT is included in the advertised price. So, something costing €10, for example, would be €8 plus €2 VAT. A little less complex than the United States, where a $10 book can cost a variety of different prices, depending on the county and state where you buy it.

France, like Germany, is in the Eurozone. And, like Germany, a significant proportion of French people speak English. However, if you want to sell to people in France, your website should offer a French language option. Otherwise you are offending and turning away business.

When it comes to payment methods, cards are still king in France with 57 percent of online purchases being made with credit or debit cards, according to Ekos. Carte Bleue and Carte Bancaire are especially important local brands. But PayPal and other alternative payment methods are growing in popularity, so payment platforms must be able to accept multiple payment options.

Driving toward mobile

Mobile commerce is growing at an exponential rate in the EU. Ecommerce News reported that RetailMeNot predicted mobile commerce will grow by 88.7 percent in 2015, compared to a mere 6 percent growth in computer-based e-commerce. European consumers have embraced mobile technology and mobile commerce.

However, mobile commerce in Europe is still not at the level it is in the United States. So U.S. merchants who have mobile optimized websites and payment options could be well placed to snap up these mobile-adopting consumers before European rivals do.

A lucrative, sophisticated market

The European Payments Roadmap is complex. While there might be standardizations of currency and sales taxes, there are still local variations in how consumers want to pay. Payment options suited for the UK consumer might not be suitable for German consumers. And we have only scratched the surface of these variations. For example, in Spain, around one quarter of e-commerce purchases are paid for on delivery. That's a payment challenge in itself.

Yet it is a lucrative and sophisticated market. Getting the best from it requires careful partnerships with companies that can act as your sat nav (satellite navigation system) as you attempt to understand how payments in Europe work. So if you are serious about getting into Europe in 2016, and you should be, step one is to choose a payment partner that has already navigated many of these challenges to help you.

end of article

Christoph Tutsch is the founder and CEO of Opex GmbH. He set up and funded the company in 2010 to provide businesses with a better way of handling online payments. He is responsible for the overall direction of the business and its continuing growth around the world. A lifelong entrepreneur, Christoph was previously co-founder and director of several companies in the telecom and marketing industries. He first came into contact with online payments in 2000 when billing Internet services on telecom bills. In the following years, he moved directly into payments and built up third-party processing for a PSP. This did not have the flexible, modular and scalable technology that a modern payment infrastructure should have. This was Christoph's main motivation to innovate the process and add greater simplicity to the payments industry.

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