Card Payments in ecommerce Mike Burns Visa USA Berkeley, CA / November 3, 1998 Session Agenda Introduction Visa Organization Definitions & Concepts Card Products Overview Consumer vs. Commercial Marketplace Consumer ecommerce Commercial ecommerce Key Issues Electronic Purchasing ERP Integration Other Payment Considerations Q&A / Discussion 2
Introduction Visa Organization 24 Members 14,308 Members 598 Members 4,793 Members 420 Members 607 Members Over 20,750 Members in Six Regions 4
Visa Organization Basic Structure Central/Regional Organizations Member Bank Ownership Marketing & Advertising Specific Product Lines Credit Cards Debit Cards Emerging Products Technology Backbone ecommerce Network & Security 5 Definitions & Concepts Visa Terms Consumer Cards Commercial Cards Members Issuers Acquirers Processors Associations Visa MasterCard 6
Definitions & Concepts Industry Terms Merchant/Vendor Enhanced Data Interchange Intranet Extranet ERP Systems SET SSL Encryption Authentication Digital Wallet Digital Signature 7 Card Products Visa Product Lines Consumer Credit Classic Gold Platinum Signature Infinity Consumer Debit CheckCard CheckCard II Commercial Cards Corporate Business Purchasing Fleet Government Cards Travel Purchase Voyager 8
Card Products Purchasing Card Features Automated Controls Transaction Spending Limits Velocity Checks Vendor Blocking Consolidated Billing Corporate Liability Single Invoice Individual Cardholder Statements Data Reporting Sales & Use Tax 1099/1057 Data 9 Card Products Purchasing Card Market Assessment $300 billion in Small Dollar Purchases Transactions Typically Less Than $5,000 Up to 90% of a Company s Transactions Average Transaction Size = $250 10
Consumer vs. Commercial Marketplace Consumer vs. Commercial Marketplace Different Approaches Shopping Behavior Vendor Characteristics Systems Design & Technology Security Speed of Transaction Cost of Transactionss 12
Ordering Trends Consumer Commercial ecommerce Percentage of Sales Volume Telephone Face-to-Face ecommerce Telephone Face-to-Face Time Time 13 Commercial Payment Trends EDI (2%) Percentage of payments by method Today Checks (95%) Tomorrow EDI Checks Purchasing Card Purchasing Card (3%) The emergence of electronic purchasing will force the growth of electronic payment 14
Online Sales Growth By Payment Type Online Sales Volume by Payment Type millions $4,000 $3,500 $3,000 $2,500 $2,000 $1,500 $1,000 $500 $0 1997 1998 1999 2000 Credit Card Smart Card E-cash E-check Other Source: Jupiter Communications, 1997 Internet Payments Report 15 Online Sales Growth By Market Segment $ Billions 140 120 100 80 60 40 20 0 1997 1998 1999 2000 Consumer Corporate Source: The Yankee Group, May 1997 16
A Virtual Environment Different Than the Physical World Technology Electronic Catalogs Security Workflow Data Integration & Reporting Account Types Ghost Accounts Card On File Systems Financial Concerns Cost of a Transaction Interchange Differences 17 Consumer ecommerce
Consumer ecommerce Current Status & Issues Security & Confidentiality Browsing & Selecting Process Transaction Time Price Issues Delivery Time & Cost Insufficient Hardware/Software/Access Local Vendor Support 19 Consumer ecommerce Marketing Efforts Member Banks Printed Materials Online Resources Improve Customer Relationships (75% of consumers have no credit card offered) Direct to Consumer Television Advertising Targeted Print Media D 20
Commercial ecommerce Key Issues Complete the Procure-to-Pay Cycle 1 5 Selection Payment Integrated Purchasing and Payables 2 4 Approval 3 Receipt Ordering 22
Key Issues Provide Card Payment Benefits 3XUFKDVLQJDQG3D\PHQW %HFRPH2QH,QWHJUDWHG3URFHVV 5HGXFHG3URFHVVLQJ &RVW7KURXJK $XWRPDWLRQ (Buyer/Seller Exchange Graphic) (IILFLHQW6XSSOLHU 0DQDJHPHQW 7LPHO\5HOHYDQW,QIRUPDWLRQ 23 Key Issues Enhanced Data (works on existing telephone-based systems) (POS system integration required) Level I Trans. Amt./Date CH Acct Number Merchant Zip, State/Prov., Name Level II Level I Data Elements Sales Tax $/Rate-Paid Customer Code Level III Level I & II Data Elements Ship to/from Postal Code Destination Country Code Item Commodity Code Item Description Item Quantity Item Unit of Measure Item Freight/Shipping Amt Item VAT Tax Amt./Rate Item Discount Indicator 24
Key Issues New Data Sources & Data Integration ANSI X.12 - EDI Standards Revision/Expansion of 811 Transaction (Consolidated Services Statement) Includes line-item detail for Purchasing Card and Corporate Card transactions Includes all data from Visa record Dun & Bradstreet Visa has endorsed the SPSC System Buyers: better data reporting Sellers: more efficient catalogs 25 Commercial ecommerce Infrastructure Corporation Corporate Wallet Software Corporate Identification Internet Certificate Authority Merchant Corporate Cardholder Certificate Merchant Certificate Member Certificates Payment Gateway Certificate Merchant Server Software Order/ Payment Processing Enhanced Transaction Data Internet IS S UER ACQUIRER Payment Processing Enhanced Data Authorization Controls Corporate Reporting VisaNet Clearing and Settlement Information Reporting Decryption/Encryption Message Translation Data Capture Authorization Processing Payment Gateway 26
Electronic Purchasing Visa s Definition www Network-based solutions that automate a buying organization s selection, approval, ordering, receipt and payment of goods and services Internet Intranet + + + Extranet 27 Electronic Purchasing Internet Model Browser-based purchasing via the WWW Secured purchasing with SET Vendors include: IBM, GlobeSet, Verifone, Trintech No pre-established relationships required Benefit = low cost of entry 28
Electronic Purchasing Intranet Model Software resident on a company s local server Vendors include: Ariba, Intelisys, Elekom, Actra (Netscape) Application accessed via a browser Electronic Catalogs can reside locally or externally Benefit = control, information and integration D 29 Electronic Purchasing Extranet Model Merchant networks linked to a corporate intranet Vendors include GEIS/TPN, EDS, Open Market External catalogs managed by vendors Low start-up cost; easy entry; many merchants Benefit = scalability 30
Electronic Purchasing Visa s Strategy Work with Member Banks to best meet the needs and demands of their customers Choose partners to demonstrate value-added functionality from Purchasing Card integration Pilot Programs are critical to our success in demonstrating utility Visa-internal Member Banks Buying Organizations 31 ERP Systems Business Climate Increased Competition Traditional Competitors Ariba, Netscape (Actra), Intelisys Expanded Offerings New Modules & Enhancements Greater % of a company s systems Larger Dependent User Base No longer only for the expert R/3 user Web-enabled rather than native application 32
ERP Systems Integration Opportunities Under Development Integrated Transaction/Invoice Data Standard file from banks with all transaction data Translation software converts information to ERP s format Purchasing Card Program Data Management Manage cardholder information with R/3 Provides automated update files to the Issuing Bank Automated Transaction Reconciliation Edit, clear, and approve transactions Edit cost centers or split lines for more detail 33 ERP Systems Integration Opportunities / Future Development Standard Commodity Coding D&B s SPSC System Enables online catalog purchasing More detailed reporting Purchasing Card as Payment Method Charge MRO on-line purchases to the Purchasing Card Reduce administrative overhead Increased control and information 34
Other Payment Considerations Other Payment Considerations Chip Technology +HDOWKFDUH )LQDQFLDOÃ6HUYLFHV 7UDYHOÃÉ (QWHUWDLQPHQW $FFHVV,GHQWLILFDWLRQ 9LUWXDO 3D\PHQWV 3URSULHWDU\Ã 3URJUDPV /R\DOW\Ã(WF &RUHÃ3URGXFW &UHGLWÃDQGÃ 'HELW 6HFXULW\ 6WRUHG 9DOXH 3HUVRQDO,QIRUPDWLRQ (GXFDWLRQ 7HOHFRP PXQLFDWLRQV *RYHUQPHQW 7UDQVSRUWDWLRQ 5HWDLO 36
Other Payment Considerations Chip Technology Value-Added Services n Identification n Building and System Access n Digital Signatures n Benefits n Medical Records n Travel Discounts n Insurance Payment Services n Credit n Debit n Stored Value 37