The Digital single market is the idea that any digital company is immediately exposed to the whole European market without any specific efforts. That once you build a digital product, you can sell in Germany, Spain, Bulgaria, Sweden.
Unfortunately, that is not the case — we are rarely seeing pan-European companies; most are focused on one or several related markets, e.g. the DACH region, the Nordics, Benelux.
But it’s not for the lack of trying from the European Commission to reduce regulatory friction by harmonizing legislation across the EU — one by one regulatory burdens are being removed. The data protection legislation is now harmonized (GDPR), the anti money laundering legislation has been EU-driven since forever, payment services and opening up of banks is harmonized via PSD2, financial instruments alike via MiFID II, the digital signature and digital identity regulation (eIDAS) has been around since 2014, and recently there has been a directive that demands that each member state removes all data localization requirements from their legislation, so that no company can say “well, my country has a requirement that my data is physically present here”.
While we may argue that these harmonized regulations could’ve been better, the issue with them is not that it stops the single market from working.
There are many examples of the common market not working.
Companies still often require paper signatures or do not recognize electronic signatures from other member states. From my personal examples, Paymill and their now defunct acquirer Klik & Pay did so, and so do many companies in the Netherlands. Even despite my attempts to explain that there’s harmonized EU law.
Worse, companies are still having member-state rather than EU thinking. The other day Bunq, an online bank told us that they do not allow accounts of companies whose managers do not have residence in the same country as the company registration. That’s a 19th century thinking about citizen and business mobility in a 21th century tech context. And Bunq is not the only company that enforces borders in the dumbest ways possible, even when no borders exist according to the law. Stripe, for example, also doesn’t have a concept of manager that resides in a different country than the one where the company is registered. At least their support was more useful and suggested to circumvent the registration form. But the restriction was there when the legal and business analysis was done. (And no, there’s no sane AML requirement that would impose such a limitation).
I’ve been to several startup events in Austria and a common theme was that the companies would focus entirely on the DACH (Germany, Austria, Switzerland) market, even though their services would be applicable to the whole union.
For content companies, copyright is an issue — even though there’s harmonized copyright legislation. You can’t serve the same content to everyone because different rightholder representatives have different arrangements (that’s a gross oversimplification of the copyright debate, of course).
I think we have two main issues that stop us from having a single market, and they are strongly interconnected.
The first one are the mental borders. We don’t think of the EU as a single entity — it’s this country and that country. This residence and that residence. You can be living in Aachen and running a business in Maastricht — and literally take a city bus line between the two cities — but the “innovative fintech companies” would not let you have an account, because they have the mental borders drawn inside their products.
The second one is language. The EU doesn’t speak one language, even though English is widely understood. You can’t easily go to another B2C market if you don’t speak the language. But even for B2B/B2E you’d get much better conversion rate if you write your emails and ads in a particular native language.
We still think in terms of “us and them”. We aren’t yet Europeans, we are Germans and Hungarians, French and Greek, Spanish and Slovak. And a Hungarian company will find it much harder to do business in Germany then a German one. Much harder than a Texas company in California, or a New York company in Pennsylvania.
That’s all based on a lot of history and national culture. But it slows the EU down — we have much of the regulatory landscape that allows a single market, but the lawyers, managers, business analysts, accountants and ultimately — customers, still have a divided view of the single market. And no amount of legal harmonization can make people see the EU as one market.
A single market doesn’t mean a single country, or even “an ever closer union”, to quote the ridiculous words of David Cameron. It just means that we should remove the mental borders when we build and expand businesses.