Risky Business? Open Invoice Payments In Germany
Monday, November 07, 2016
Posted by Christopher Taine to eCommerce, Payments Risk Management
Share this:
PayProtect is used by merchants and payment service providers to manage the risk around 'purchase on account' – a payment method that is a must when operating in the large German eCommerce marketplace. Jens Kühle, MD of GPP, a company of the GFKL-Lowell Group, sat down with us to explain the specifics of eCommerce risk management in the German market.
GFKL is one of Europe’s leading receivables management companies, managing EUR 17 billion in receivables. The GFKL Group also offers the PayProtect eCommerce risk management solution, which is fully integrated with ACI’s UP eCommerce Payments solution.
So-called ‘purchase on account’ – delivering physical goods along with a paper invoice to be paid by the receiver – undeniably carries higher risk for the merchant. Why offer this, when there are many payment methods considered safer?
Purchase on account remains the preferred payment method of the majority of Germans who shop online. Some studies show that nearly 80% of consumers want to have the option of paying by invoice, so it’s clear that offering it is necessary to convert shoppers into buyers. This preference extends to the rest of the German-speaking DACH region (Austria and Switzerland) too. The continuing popularity of purchase on account is due to the fact that the shopper does not need to enter sensitive payment data (including credit card numbers) on a merchant’s website, but also because of speed – the shopper only needs to enter address information.
This is certainly quite a difference to card-dominated markets such as the U.S. or the United Kingdom – what is your recommendation for merchants and payment service providers from these regions that want to reach German shoppers?
Germany, considered by many businesses the doorway to the European region, is an enticing market, with EUR 70 billion in sales forecast in 2017. But any international merchant or payment provider that wants to take advantage of this market should support purchase on account. Not offering it will lead to lower conversion rates, as shoppers abandon their shopping carts at the checkout, due to their preferred payment method – purchase on account – not being available.
A survey of the most profitable online businesses in Germany shows that purchase on account is now offered by 93.3% of merchants, so it is also easy for shoppers to shop elsewhere, rather than select a less preferable payment method, such as credit card.
Can you explain then, in more detail, the steps that merchants and payment providers – including those operating cross-border - can take to manage risk when they do choose to support invoice payments?
It all starts with having the right fraud checks in place, determining the likelihood of fraud before purchase. For example, our PayProtect product is integrated into an online shop, and in the background a real-time address and credit check takes place. The result of this check leads to a recommendation, based upon which PayProtect will take on guarantee of payment.
A simple traffic light system is used; green means that PayProtect takes on the full payment guarantee, even if a consumer deemed to be trustworthy does not pay after the net-30 terms. After the first reminder from the merchant, PayProtect will reimburse the merchant and take on collection responsibilities. We also do this for direct debit, where we check account data. For the shopper, there is no difference to the checkout process; for the merchant, there is the possibility and the security of being able to offer riskier payment methods without the risk.
What results can merchants expect from implementing PayProtect?
Our own data shows that integration of PayProtect can deliver a 25-35% revenue increase, and this is confirmed by feedback from our customers, including a major fashion label with subsidiaries across Europe.
So how important is it then – in your view – for payment service providers to offer merchant tools that ensure a smooth and seamless payment process?
It is absolutely crucial for payments to be smooth and seamless. PayProtect does this by remaining in the background, while protecting from fraud and ensuring that the merchant is paid directly by the consumer. Our goal is to simplify eCommerce expansion and risk management for those global businesses that want to succeed in the DACH region.
Regardless of the market, integrating the most popular payment methods demonstrably leads to a higher conversion rate and increased sales, which ACI enables through itsg global payment network. As a fully integrated endpoint within that network, PayProtect is quick and easy to set up for any business using ACI’s UP eCommerce Payments solution.
Related Blog Posts
How India is Tackling the Challenges of Digital Payments Growth
India’s massive transformation from a cash-based society to a cashless society is underscored by the rise in fintech adoption and the growth of the Unified Payments Interface (UPI) platform, which is now processing more than one billion transactions each month.
Deep Dive: Latin American Fintech Market (Part 2)
To support fintechs’ development and create a more inclusive financial system, governments across the Latin American region should adopt different regulations. Some good practices implemented in other countries, like the U.K. or Singapore, could also be adopted in Latin America, such as temporary exemptions on fintech authorizations on behalf of regulating entities, or the creation of temporary regulation sandboxes in which fintechs can operate, evaluate their business models and offer their innovative products in supervised environments.
Deep Dive: Latin American Fintech Market (Part 1)
There is a gap between what financial institutions currently offer versus what today´s customers want in Latin America, and this is where fintechs are earning a reputation for customer-centricity, personalization, quick response and seamless delivery. The relationship between fintechs and traditional financial institutions in Latin America has evolved from competition to collaboration, with the aim of efficiently working together and effectively scaling innovation, while also driving financial inclusion for the underbanked.
From API to AI to I: Banking Tech Gets Personal
Tired feet. Running out of business cards. Countless LinkedIn connections – sound familiar? This time of the year is conference season; the annual SIBOS (SWIFT) and Money20/20 USA gatherings spanning the autumn give attendees plenty of hot topics and talking points. My American colleagues refer to this season as “the fall.” I trust this to be an observation on leaves and fruit rather than a sequitur on the state of the fintech industry. Either way, it’s a good time to harvest, to take stock and to work out what we should be doing with the apparent abundance of innovative produce.
How to Maximize the Value of Partnerships Between Fintechs and FIs
The LATAM Open Banking & Fintech Partnership, organized by Connect Global Group, was held earlier this year in Mexico City, and ACI participated as one of the forum partners driving discussions on how to maximize value from collaborative partnerships between FIs and Fintechs. We explored the invaluable benefits of open API and strategies to differentiate the offerings of FIs and Fintechs, address consumer demands, and best practices for implementation aligned to regulatory requirements.
A Deep Dive into the Payment Tendencies in the Mexican Market (Part 2)
While the sheer volume and age of potential shoppers makes México an attractive market, there is another component to the viability of eCommerce: México is mobile. A recent study performed by the Asociación de Internet.mx, shows that México is one of 22 countries leading the trend toward mobile commerce, with young adults making 88 percent of smartphone purchases. The country has one of the largest mobile markets in Latin America, with one-third of all residents using smartphones.
A Deep Dive into the Payment Tendencies in the Mexican Market (Part 1)
The population of México is the second largest in Latin America, with 122 million residents, 39 percent of whom are considered middle-class. The population is relatively young, with an average age of just 27, and one-third estimated to be millennials, which is often a factor in driving the popularity of eCommerce. Last year, 56 million people accessed the internet in México, though despite the high number of internet and mobile phone users in the country, nearly two-thirds of the population do not have bank accounts (source: Banco de Mexico).
How to Be a Payments Trailblazer – The Seven Habits of Highly Innovative Organizations
The new Culture of Innovation Index from Ovum and ACI identified segments—from banks to intermediaries to merchants to corporates—at the cutting edge (of innovation) across the payments ecosystem. But what is most notable about those segments that have reached ‘trailblazing’ status is the apparent lack of commonality between them. No one segment, nor one region fosters better innovation. In fact, what’s driving these segments/organizations to be best of breed is their own culture of excellence. The only thing they have in common is their attitude.
Customer Innovation: Erste Bank [Q&A]
The global banking sector is becoming both more strategically focused and technologically advanced, responding to rising consumer expectations while trying to defend market share against an increasing array of competitors. A great deal of emphasis is being placed on digitizing core business processes, and reassessing organizational structures and internal talent to be better prepared for the future of banking.
Regulating for Real-Time: The Role of Government in Payments Modernization
Dr. Leo Lipis and Craig Ramsey, Head of Real-Time Payments for ACI Worldwide, continue their discussion on real-time payments and the findings of the new white paper, Get More from Real-Time.