A division of Pivotal Payments Payment Acceptance Strategies in a Global Ecommerce Environment Presented by: Patrick Huynh, Senior Vice President, Client Solutions
Introduction About GlobalOne GlobalOne is a division of Pivotal Payments that focuses on global ecommerce. Pivotal Payments is a leading provider of merchant services and payment processing solutions. More than 70,000 customers, processing over US $12 billion in annual bankcard sales volume. Founded in 2003, today over 450 employees. Patrick Huynh Responsible for the GlobalOne Ecommerce Division at Pivotal Payments. 2
Agenda 1. Global Ecommerce Opportunities 2. Payment Technology 3. Currency Considerations 4. Payment Methods 5. Foreign Domestication 3
Global Ecommerce Opportunities 4
Global Ecommerce Opportunities Global online trade will account for over US$1.5 trillion dollars by the end of 2014. Statistics: emarketer B2C ecommerce report EUROPE: $405.4BN NORTH AMERICA: $482.6BN 34.9% 32.07% 26.94 % LATIN AMERICA, CARRIBEAN: $57.7BN 3.83 % ASIA PACIFIC: $525.2BN MIDDLE EAST, NORTH AFRICA: $33.8BN 2.25 % 5
Access High Growth Markets Asia-Pacific accounts for nearly a third of all B2C e-commerce sales in the world, surpassing North America and Europe combined! 25% E-Commerce Growth 2014, 2015 11.5% 11% Asia Pacific North America Western Europe Forecasted growth for Asia Pacific is on pace to outstrip that of North America and Western Europe by nearly 2 to 1. 6
Payment Technology 7
Payment Technology Payment Gateway Integration Connectivity Mobile Environment Essentially same as Ecommerce Higher shopping cart abandonment Growing faster than PC based purchases Several methods support one click checkout Apple Pay Biggest change is at the point of sale No major impact on Ecommerce Mobile checkout through wallet/tokenization 8
Payment Technology Tokenization Great way to store cardholder data Replaces full credit card number with a token Can be used to perform all transaction types Reduces scope of PCI Liability Recurring Billing Automatically bill card holder based on predetermined cycle Reduce time to process payments Improve cash flow Auto Account Updater Keeps card database current Connects directly to Visa and MasterCard Reduce declined transaction due to expired cards or account changes 9
Payment Technology Fraud Management Number of solutions available; choose best fit for your needs Implement in layers to avoid loss of sales User authentication or 3D Secure Common fraud controls: AVS, CVV check Velocity control GeoIP Negative database Device fingerprinting PCI Data Security: Not a fraud management rule, but addresses data safekeeping Many recent major data breaches 4 Levels: requirements differ based on processing environment and volume Applies to all parties, including payment processor, financial institution, hardware/software providers and merchants 10
Currency Considerations 11
Multi-Currency Pricing (MCP) Price products and services in multiple currencies, showing customers the exact amount they re paying in a currency they understand Provide international clients a local shopping experience Enhance client satisfaction and loyalty and reduce service needs by billing the exact amount cardholders will see on their statement Gain access to a global marketplace with no additional investment MCP generates an average 12% increase in revenues due to the added convenience and improved shopping experience provided. 12
Electronic Dynamic Currency Conversion (edcc) Provides added transparency at the checkout by automatically converting the purchase price to the client's currency at the daily exchange rate Personalize the shopping experience for international clients Receive reporting and settlement information in US dollar amounts Aid consumer confidence to improve conversions by reducing friction at checkout MCP and edcc allows merchants to easily test international markets prior to investing more heavily in foreign business infrastructure 13
Local Market Pricing Most products in countries outside of the US sell for a higher value, thereby allowing merchants to capture more revenue US Web Store $519 UK Web Store 399 Benefit from the rate of exchange: US$131 extra profit ( 399 = US$650) 14
Like to Like Processing LIKE TO LIKE CURRENCIES Bill cardholders and receive settlement in the same currency USD - US Dollar EURO - Euro Unit GBP - Pound Sterling CAD - Canadian Dollar ISK - Icelandic Krona DKK - Danish Krone NOK - Norwegian Krone CHF - Swiss Francs HKD - Hong Kong Dollar JPY - Japanese Yen AUD - Australian Dollar SEK - Swedish Krona 15
Payment Methods 16
Alternative and Local Payment Options Credit Cards are not the favored payment option for consumers outside the US. Maximize sales potential by accepting payment types consumers prefer More shoppers have a bank card than credit card Reduces risk involved with only accepting major credit cards Alternative payments account for over $200 billion annually The EU has less than a 50% credit card penetration rate. Germany, the EU s largest market, has less than 35%! Japan has a 60% credit card penetration rate, China 3%. Latin America, Africa and the Middle East even lower 17
Examples of Card Payment Options Worldwide 18
Alternative and Local Payment Options A lot of press (positive and negative) Small number of individuals own large amount of Bitcoin High level of fluctuation Unregulated Bitcoin is a software-based online payment system described by Satoshi Nakamoto in 2008 and introduced as open-source software in 2009. Some countries are banning the use of Bitcoin Opens the door to a true alternative to currency and payment methods 19
Foreign Domestication 20
Foreign Domestication PROS: Higher approvals Lower interchange costs CONS: Compliance issues Local taxes and profit repatriation Generally complicated 21
Foreign Domestication Example of merchant processing $1 Million in sales volume: US Only US w/mcp Domestic (Netherland) Interchange (average) 2.20% $ 22,000.00 2.20% $ 22,000.00 0.90% $ 9,000.00 Cross Border Fees 0.80% $ 8,000.00 0.80% $ 8,000.00 0% $ - Assessment 0.10% $ 1,000.00 0.10% $ 1,000.00 0.03% $ 300.00 Currency Conversion 0% $ - 2.75% $ 27,500.00 0% $ - Total Processing Cost 3.10% $ 31,000.00 5.85% $ 58,500.00 0.93% $ 9,300.00 Auth Approval Lower Lower Plus 5% $ 50,000.00 Sales Conversion Lower Up 12% $ 120,000.00 Up 12% $ 120,000.00 Local Market Pricing No Yes Yes Bottom Line -$ 31,000.00 $ 61,500.00 $ 160,700.00 Transforming a cost center into a meaningful revenue uplift of ~10-20% Multi Currency Pricing benefits: Improve sales conversion Increase profit margin through local market pricing Domestic processing strategy: Reduces interchange costs Improve authorisation approval Increase sales conversion Maintain advantage of local market pricing 22
Conclusion To succeed online, e-retailers must diversify across global markets to monetize international traffic. 23
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