By Caroline Hometh
There's not an aspect of the electronic payment processing industry that is immune to the expanding globalization of the marketplace. One area that has seen tremendous impact is the card-not-present (CNP) arena. At an August 2010 conference sponsored by the Direct Response Forum, international issues were front and center.
The DRF (www.directresponse.org) is committed to helping merchant service providers that process CNP transactions. It serves CNP professionals by providing information about best practices, networking opportunities, advocacy for merchants, and access to the industry leaders shaping CNP processes and regulations.
The DRF provides an exclusive venue for peers to meet and share practical solutions that address the unique challenges facing the payments industry.
DRF conferences do not allow exhibitors and request that normal sales activities be curtailed to allow for a greater opportunity to exchange information and contacts. Its goal of improving the international payment processing industry as a whole is reflected in its mission statement: "Protect and positively influence change within the rapidly evolving card-not-present payments industry."
This year's conference was held in Memphis, Tenn. It is one of my favorite conferences because there are more honest discussions among competitors at the DRF than at any other industry event. This is because of the no selling, no media and no pitching requirements set by the DRF. It is all about open dialog that focuses on the concerns of our industry, with the intent to improve our experiences and those of our merchants.
One of the most compelling dialogs conducted dealt with alternative payments - an area of globalization that involves more consumers than you would think. According to Forrester Research Inc., three-quarters of U.S. online buyers have an alternative payment account.
These transactions represented 11 percent of total online payments in 2009 and are expected to reach 12 percent by 2011. Because alternative payment solutions cost 15 to 20 percent less for merchants, there is continued interest in this offering, especially for international merchant accounts.
Forrester determined that 20 percent of consumers think about what payment type they will use during their shopping experience. If your merchant offers an alternative payment that is cheaper and preferable from an operational standpoint, the merchant can put an icon on his website to promote it and, as a result, garner increased international and domestic traffic.
International alternative payment methods include different types of debit cards and bank transfers, depending on the country and region, so you should be aware of the needs of your international merchant's customer base.
For example, European local bank transfers (a push mechanism with no-reversal risk, seven-day settlement) require consumer mandates at the bank. Refunds are not available in every country, and some banks demand a manual process for each country with different required fields.
This payment type may slowly decrease in favor of real-time bank transfers. Real-time bank transfers (now officially called "online banking enabled ePayments") are quickly growing, enable immediate shipment and are recognizable to consumers, with guaranteed funds everywhere but Germany.
Another popular alternative payment that has a substantial international presence is direct debit. Direct debit methods are commonly used to pay mortgages and utility bills throughout Europe and are geared toward recurring payments with varying amounts.
It is important to stress that acquirers, ISOs and merchant level salespeople should help their merchants establish best practices and teach them to explain the transaction process to consumers.
If you are talking to a merchant and he or she doesn't know all the different forms of payment, present the choices that are appropriate for that merchant's customers. It was stated repeatedly throughout the DRF conference to never offer more than three to five payment types per country. The main reason: to avoid consumer confusion.
When children are very little, you select clothes for them to wear. You'd never put them in front of their entire wardrobe and tell them to pick something. They would be overwhelmed. The same holds true for CNP consumers; they can get overwhelmed looking at dozens of payment types, some of which aren't even appropriate for their country.
Country-specific debit cards are expected to consolidate over the next couple of years, and International Maestro is emerging as the major player. Owned by MasterCard Worldwide and used globally outside of the United States, Maestro is most popular in Europe. According to recent figures, 310,000,000 cards have been issued. That's a lot of global sales. Do your international merchants offer Maestro on their websites?
Visa Inc. is focusing its e-commerce activities on online authentication as well as a new web-based service called RightCliq (www.rightcliq.visa.com). This new offering is an enrollment service that provides a social network for consumers to share information on their purchases and transactional experiences - sort of a blog for CNP transactions worldwide.
It is geared toward younger, hipper, tech-savvy consumers who are comfortable texting, tweeting and sharing information electronically.
Visa also has frozen dynamic currency conversion for online transactions. For more details on this, Visa recommends reviewing its April 2010 international operating regulations ( http://usa.visa.com/download/merchants/visa-international-operating-regulations-main.pdf).
Another topic that promoted lively dialog at this year's DRF conference was the issue of getting merchants registered in local European regions. Many ISOs ask, "What difference does it make and why should I go through the trouble of getting registered in Europe to offer local currencies? Why not just offer multiple currency conversion (MCC) and settle in USD?"
Is there benefit to securing European registration? Absolutely. The primary reason is that it is significantly cheaper. U.S. merchants experience an approximate 2.8 percent reduction in interchange, an improved cardholder experience and elimination of international transaction fees.
MCC requires nonqualified fees, cross-border fees and assessment fees. That's a whole bunch of fees that don't exist with European registration. The important issue is to select an experienced, reputable global processing partner that is knowledgeable about European registration.
As with any other aspect of conducting business, do your due diligence.
Carrie Hometh is a respected industry professional in the international marketplace with more than two decades of global experience and expertise. She currently serves as Senior Vice President of Sales and Marketing for Payvision, a leading international payment solutions provider that offers a comprehensive suite of products and services that include global acquiring, multicurrency processing and alternative payment solutions. She can be contacted at email@example.com.
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