Published in Insurancenewsnet.com
Monday, August 29, 2011
The payment transaction is becoming a core part of the online shopping experience. The right payments-processing platform can provide the operational infrastructure that creates and supports a truly agile ecommerce business.
But the whole payments arena is experiencing some fairly seismic shifts, and the real challenge is ensuring that current technology does not hinder future business. A number of key trends have emerged that will dictate technology requirements.
* GREATER VOLUMES
The first trend is simple: growth. Pure-play Internet companies, ecommerce units of traditional bricks-and-mortar retailers and catalog operators are all seeing significant, ever-growing online transaction volumes.
Expansion of ecommerce goes hand in hand with greater adoption of electronic payments — which are expected to grow in volume at nearly 5% a year to reach 299 billion items by 2012. All retailers are affected. Some of the world's largest are ready to handle a million-plus Visa, MasterCard, AmEx and proprietary card transactions a day across their physical and online channels.
* MULTIPLE PAYMENT TYPES
Growth of electronic payments is not confined to debit and credit cards. The second trend facing retailers is the growing use of new and varied payment types.
Credit and signature debit cards still account for 90% of the market in the U.S., but PayPal, Bill Me Now and other payment types are gaining market share. In Europe, where EMV (Europay, MasterCard and Visa) standards have long been in play, credit and debit cards dominate.
But electronic bank transfers and other local solutions, such as giropay in Germany and iDeal in the Netherlands, are still common. Various e-wallet schemes are also in use in almost all countries, and online cash vouchers, such as Cash-Ticket and uKash are gaining in popularity.
The international dimension is particularly important for those selling “virtual goods” — downloadable music, software and services — which require no physical distribution. Increasingly, multiple languages, multiple currencies and differing fiscal, legal and financial regulations must be addressed.
* CUSTOMER FOCUS
The potential of loyalty schemes is yet to be realized: According to a recent survey for ACI Worldwide, nearly half of all loyalty scheme members in the U.S. never or only rarely take advantage of program benefits online. Eighty percent said that easy online access to their membership account would encourage them to shop at websites that honor their loyalty programs.
What's more, online accounts to speed up repeat orders and payment processing are increasingly popular, but they must be compliant with PCI regulations.
More than ever, online retailers, like their physical counterparts, have to understand who their customers are, and then deliver the same quality in terms of service, “shopability,” merchandise and fulfillment online as they do in-store. The challenge is to establish a clear online identity, and to use customer data to inform everything from goods offered to payment types accepted.
This goes to the heart of the online retail challenge. We are entering the era of the omni-channel merchant who offers a seamless customer experience across all channels — online, mobile and store — and has the front and back-office systems to tie it all together.
* TACKLING FRAUD
Multichannel merchants must also address the ever-present issue of fraud. The delay between payment authorization and settlement makes online retailers fertile ground for fraudsters.
Card-not-present fraud is a perennial problem, but fraud is not static: Criminals constantly create new mutations of old methods — keeping merchants, customers and banks on their guard.
Card issuers have already attempted to mitigate the problem. The 3D Secure protocol, which underpins Verified by Visa, MasterCard SecureCode and J/Secure, further enhances online payment security by adding an additional layer of authentication.
Visa Europe has also announced the CodeSure payment card, which provides cardholders with additional security online by generating single-use codes that the customer enters online to authenticate a transaction. With 3D Secure, financial liability shifts to the issuer, but the reputational loss still remains with the merchant.