Risky Business? Open Invoice Payments In Germany
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
Strong Customer Authentication: New Rules Will Trigger Profound Changes in Many Organizations [Q&A]
One of the biggest industry issues for the payments community right now is strong customer authentication (SCA) – the new regulation for card payments, including card-not-present or eCommerce payments. This is due to come into force on December 31, 2020 in the EU, and on September 14, 2021 in the U.K. ACI recently brought together industry stakeholders for a webinar entitled Competition Versus Compliance: How an SCA Exemptions Strategy Can Grow Your Business. I spoke with these stakeholders about the challenges, but also opportunities, that SCA will bring to the payments industry.
Gaming Merchants Are Riding a Rollercoaster in 2020 with Rises in Revenue and Fraud
With the social lives of millions worldwide on hold due to the COVID-19 pandemic, many have turned to video gaming as a safe outlet to interact with others or to simply counter boredom.
How Australian Financial Institutions Can Get the Most from Strong Customer Authentication
Whether viewed through the prism of 3D Secure 2.2 (3DS2), the AusPayNet CNP Fraud Mitigation Framework, or the Australian Government’s Consumer Data Right, strong customer authentication (SCA) is now — or about to be — mandatory for financial organizations across Australia. Here is a quick primer on how Australian financial institutions can make the most of SCA.
Defense in Depth: Fighting Fraud in India with a Multi-Layered Approach
There’s a quip, albeit ironic, making the rounds as forwarded emails and messages – “Who’s driving digital transformation among enterprises: CEO or CIO? The correct answer is COVID-19.” Going beyond impacting global well-being, COVID-19 is pushing the corporate world to rapidly introduce new measures for business continuity. Diametrically opposite to continuity, the black swan event of the novel coronavirus is creating disruption in terms of exploitation and fraud perpetration – especially in the banking and financial sector.
Introducing Incremental Learning: An Industry-First Boost for Fraud Prevention
In our previous blog on machine learning, we sought to clarify its role in fraud prevention for merchants. To summarize, it can be an extremely effective way to identify patterns of fraud in a manner and at a speed that humans cannot. It is a critical tool in the fight against fraud, especially when used as part of a multi-layered fraud solution.
Machine Learning: Separating Fact from Fraud Fiction for Merchants
Machine learning is a broad discipline about which many claims, sometimes extravagant, are made. In recent years, it has often been hailed as the most effective answer to stopping payments fraud.
At ACI, we’ve been working with machine learning models to prevent fraud for over two decades – and we know they can play a critical role in improving fraud detection accuracy. Here we bring together a few insights on how models can be used most effectively.
For Financial Institutions, Community Is Critical to Fighting Fraud with Machine Learning
In November 2019, our experts predicted that democratized machine learning and shared intelligence would be among the most important fraud prevention trends for financial institutions (FIs) in 2020.
Fraud Prevention Is the Frontline of Customer Experience
Digital transformation has done more than disrupt business models. In almost every consumer-focused market – and most business-to-business ones, too – it has fundamentally re-oriented the competitive landscape around customer experience as a core differentiator.
COVID-19: Global eCommerce Sales are likely to rise beyond the crisis and businesses need to prepare accordingly
Since the start of the Covid-19 pandemic, ACI has published a monthly Covid-19 eCommerce Tracker, analyzing global eCommerce sales, consumer purchasing behaviors and fraud trends. Katrin Boettger spoke with ACI’s Debbie Guerra, executive vice president at ACI, about the latest eCommerce trends and the long-term changes the pandemic may bring for consumers and merchants.
SCA: How PSPs Can Help Merchants Stay One Step Ahead
The main objective of PSD2’s Strong Customer Authentication (SCA) is to protect customers and reduce fraud by introducing new measures that ensure that customer-initiated transactions are being made by the genuine cardholder.