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payment acceptance
Cross Border E-commerce:Challenges and Opportunities
Howard Bell,Head of Online Payments, Barclaycard Internet Retailing ‘Payments & Fraud’ 11th February 2010
2Cross Border eCommerce Feb 11th 2010payment acceptance
Challenges and Opportunities
• european eCommerce trends
• market opportunities and challenges for retailers
• beating fraud
3Cross Border eCommerce Feb 11th 2010payment acceptance
In EU markets, where internet penetration is low, e-commerce is growing rapidly …..
0
50,000
100,000
150,000
200,000
250,000
300,000
2005 2006 2007 2008 2009 2010 2011
Rest of Europe
Nordics
Benelux
Spain
Italy
France
Germany
United Kingdom
€ m
illio
ns
Source: Forrester Research 2008
European e-commerce: online retail sales (Source: Forrester)
4Cross Border eCommerce Feb 11th 2010payment acceptance
The European E-commerce Landscape
The Headlines
• The European eCommerce payments market is worth €230 billion; €95 billion from the UK
• Visa and MasterCard are top 2 EU payment methods; PayPal is 3rd
• There are approximately 500,000 e-commerce merchants across the EU – and 1/3 of these are internet only stores
• France, Spain and Italy are the fastest growing markets but currently have low internet penetration
• PCI DSS is a Global (and hence pan-European) requirement
• Increasingly Tier 2 EU merchants are seeking a hosted paypage (acquiring and gateway combined)
Global Payment Acceptance Barclaycard SmartPay – EU Marketing & Roll-out – 07.01.2010
Source: Barclaycard Proprietary Research, 2010
5Cross Border eCommerce Feb 11th 2010payment acceptance
European shoppers expect choice
Simple payments? “Which payment method (s) do you prefer when you buy products online?*”
Source: Forrester Research Inc
40%
26%
24%
23%
19%
10%
60%
3%
43%
35%
5%
3%
35%
3%
57%
16%
17%
3%
26%
56%
3%
22%
31%
10%
51%
20%
14%
14%
2%
32%
51%
14%
10%
26%
19%
19%
19%
43%
14%
11%
37%
16%
34%
43%
17%
11%
13%
24%
Credit card
Electronic bank transfer
Debit/payment card
PayPal
Cheque/accept giro
Cash
Maestro/Solo UK Carte Bleue FRELV DE iDEAL NL
* Forrester allowed Consumers to select preferred methods and allowed multiple votes (hence totals>100%)
6Cross Border eCommerce Feb 11th 2010payment acceptance
Opportunities are real; challenges need active management
• New Markets
• New Payment Streams
• New Shoppers
• PCI DSS
• Fraud & Chargebacks
• New Payment Methods
Opportunities Challenges
7Cross Border eCommerce Feb 11th 2010payment acceptance
International CNP Fraud*
£0.0
£0.1
£0.2
£0.3
£0.4
£0.5
£0.6
£0.7
£0.8
£0.9
£1.0
US Spain Ireland Cyprus France Gibralter Luxembourg Germany Italy Holland
* as at Nov 2009
Headlines
• Decline in CNP Fraud (-13%) vs 2008
• CNP Fraud still 60% of total fraud
• Top 5 buyer countries are US, Spain, Ireland, Cyprus and France
• Mix skewed towards Credit but Debit increasing(Credit 48% , Debit 40% , Charge 12%)
International CNP fraud, Nov 2009
8Cross Border eCommerce Feb 11th 2010payment acceptance
Barclaycard’s Approach to Beating Online Fraud
• Industry-Leading Performance–losses 40% lower than UK average
» Robust vetting and advanced risk analytics
• Partnership approach with customers
» Active collaboration with card schemes to identify & block fraudulent buyers
» Leading Influence over Risk Policy e.g. PCI DSS
• New Propositions
» “Fraud Reporter” – online daily file (PGP) to prevent dispatch to fraudsters
payment acceptance
your questions?
Confidential
10Cross Border eCommerce Feb 11th 2010payment acceptance
What is Payment Card Fraud?
Involves the use of a credit/debit card without the consent of the genuine cardholder
or the account itself has been set up fraudulently.
Fraud types include:
• CNP Fraud – merchant, retailer or service provider has no physical access to payment card. e.g. Internet / Mail Order / Telephone / Fax
• Counterfeit Fraud (cloned / skimmed) – A plastic card that has been printed, embossed or encoded so as to purport to be a genuine payment card issued with the authority of the genuine issuer
• Identity Theft / Fraud – Where someone uses your personal information such as name, payment card number or other identifying information without your permission to commit fraud or other crimes
– Mail Interception / Social Engineering / Phishing / Malware Attacks / Raiding Bins • Other Fraud Types – Lost & Stolen / Non Receipt of Mail / Application Fraud
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•Acquirer loss.
No loss to BPA or retailer
• Issuer Loss
•Fraudulent funds recovered as a result of freezing bank accounts & diverting pdq
Collusive•1st Party Fraud by BPA
Retailer
Issuer Chargeback
right exists
•CNP / No 3DS
•Card Present - No supporting evidence, signatures etc
Shopper has rights
Issuer has no chargeback right
•Where cardholder authentication exists - Chip & PIN or 3DS)
Shopper has rights
Issuer has no chargeback right
•Where cardholder authentication exists - Chip & PIN or 3DS
Issuer Chargeback
right exists
•CNP / No 3DS
•Card Present - No supporting evidence, signatures, verification etc
• Retailer loss
Loss to BPA = Retailer unable to pay chargebacks
•Fraud Debt owed to BPA. Resulting from fraud activity at the retailer.
Genuine• 3rd Party Fraud at BPA
Retailer
Fraud Occurs at Retailer
Chargeback right..
Loss..
What is acquiring fraud?
12Cross Border eCommerce Feb 11th 2010payment acceptance
Customer Recruitment – Best Practice
Online customer additional information – Best practice
- Customer service number- E-mail address to contact company- Statement on risk & fraud controls- Delivery methods & timings- Age verification methodology (age restricted goods & services)- Refund & returns policies- Privacy statements (permissible uses of customer information)- Depending on the type of customer, perhaps a terms of service and / or
acceptable use policy
13Cross Border eCommerce Feb 11th 2010payment acceptance
Customer Recruitment – Best Practice
Trading information
− Nature of goods & services
− Design of home page & location of billing pages
− Price patterns
− Merchant location (Physical & Legal)
− Ave or projected turnover
− Ave or projected refund volume & refund policy
− Ave or projected chargeback or fraud rates
− Disclosure of all payment mechanisms offered
− Disclosure of all sales channels inc all URL’s or referral sites
− Check validity of telephone numbers / email addresses / listed [personal & other contact information
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