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
Instant Payments in Italy – And Beyond: Lessons from Il Salone dei Pagamenti
ACI was invited back to Il Salone dei Pagamenti – Italy’s premier payments event organized by the Italian Banking Association (ABI) – to participate in a panel, “SEPA Inst – the Future.” As expected, the session was packed with stats and advice for a more efficient roll out of instant payments – in Italy and beyond.
Dedicated Followers of Fintech: Why Transaction Banking Never Goes Out of Fashion
Taking part in a panel at a recent corporate treasury conference, I was introduced as a ‘consumer payments expert’ – not an obvious qualification for sharing stage-time with serious corporate liquidity and cash management folk, but as the talk track was on mobile wallets and Open Banking, I had some reasonably safe and relevant content on which to fall back.
Sibos Preview: The Five Trends Transforming Real-Time Payments
Real-time is now a reality, with more than 30 schemes live around the world. And real-time is in the spotlight as banks and financial service providers make their way to Sydney for Sibos 2018. What better time to look ahead at the key trends that are going to shape the ongoing development of real-time payments.
API Management: The Reason Digital Open Banking Can Fly
When it comes to thinking about the different roles that an API Manager can play for an organization, I personally think that an airport provides the perfect analogy. The customer is the passenger, the third-party organizations using a bank’s APIs are the airlines and the airport itself is the bank. I also think this analogy helps to visualize the variety of API management capabilities – including the role of an API gateway.
Can Corporate Banking be as Easy as Ordering Pizza?
ACI recently hosted Greenwich Associates on a webinar to discuss corporate banking. While not a topic that would usually make attendees salivate, the discussion turned toward ordering pizza (maybe, because it was close to lunchtime) and Greenwich highlighted how corporate banking should be as easy as ordering pizza.
Modernizing Cross-Border Transfers with SWIFT gpi
The customer experience for domestic payments – retail and corporate – has recently undergone a complete transformation. There’s still plenty more that could be achieved, but the advent of real-time payments in combination with open APIs has seen the launch of Request for Payment services and direct eCommerce instant payments in the UK and Europe. And it’s not just the PSD2 push in Europe that’s driving change – in the U.S., Zelle is moving beyond standalone P2P payments to become an integrated part of the retail banking app experience, as well as being included in new kinds of corporate disbursements.
Instant + Open Payments = A Winning Combination
I recently joined a panel discussion at EBAday 2018, alongside representatives from across the payments ecosystem, and the clear consensus was that real-time payments will be the new normal. This was evidenced by some of the interactive polls carried out.
Maintain Vs. Invest: What the Digital Era Ushers in for Banks
Taking place this week in Brussels, the European Credit Research Institute (ECRI) will host a high-level debate on how policymakers can build on the process of digitalisation of banks to raise competitiveness in light of increased competition from fintech start-ups and tech giants.
How the Merchant Payment Ecosystem Can Create Value in Instant Payments
Recently, ACI conducted some research into the appetite to make use of instant payments among corporates. The results were overwhelmingly favorable, but when we think about the benefits of immediate payments for corporates, it does seem obvious that they would want to leverage this new payment type.
Real-Time Payments Will be Europe’s Most Dominant Payments System – Are You Ready to Realize the Full Value?
Since the launch of the SCT Inst rulebook in November 2017, many more banks are live and offering real-time payments to their customers, with most of the rest committed to 2018. The buzzword at the recent ECB #TIPSapp Event in Frankfurt was ‘Interoperability,’ or as my friend José Beltrán from STET would say, ‘Reachability.’ No-one expressed this more clearly on February 6th than Javier Santamaria, President of the European Payments Council, when he reiterated his message from Il Salone Dei Pagamenti, the day after the SEPA launch; "We have launched the Pan-EU scheme, now it is up to you in the audience and beyond to take advantage of it and make it work."