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INSIGHT: GLOBAL ONLINE PAYMENT PREFERENCES

BRAZIL

MEXICO

RUSSIA

CHINA

Discover the potential of these four emerging eCommerce markets. Each factsheet contains information on local methods of payment, the restrictions, mandates and legal requirements that ought to be considered, along with the mobile payments landscape.

© 2013 CyberSource Ltd, a wholly owned subsidiary of CyberSource Corporation, a Visa company. All rights reserved. cybersource.co.uk

eCommerce• Consumerelectronicsandcomputerhardwarewilldrive

eCommerce in Brazil; these segments currently account for more than half the online retail revenues. Categories like clothing are less popular.2

• Manyconsumerscontinuetobecautiousaboutshoppingonline, preferring to speak with a customer service representative prior to placing an order.3

• DomesticplayerslikeAmericanas.com,MercadoLivre,BuscaPé, and Submarino dominate the online retail landscape alongside a few multinational companies like Walmart and Carrefour. Global competition like Sony, Netflix and Amazon Web Services are gradually making inroads.

• RetailersinBrazilhavetrainedconsumersinSãoPauloandRiodeJaneirotoexpectpackagesinacoupleofdays, even when they select free shipping.2

• Shippingpricesanddeliverytimesvarybygeography.Customers in remote cities like the northeastern city of FortalezaortheAmazon’sregionalcapitalofManaus can expect deliveries to take three weeks or more, even after paying steep shipping charges.

• Recently,theleadingonlineretailerAmericanas.comwasprohibited from accepting new orders from consumers in RiodeJaneiroafteritfailedtodeliverpackagesontime.

Online Payment Preference

* Other includes miscellaneous online payment methods, cash and check. Source: ComScore study 2011 commissioned by CyberSource.

Boleto Bancario: 11.3%Debit Card: 8.3%Online Bank Transfer/ Direct Debit: 5.3%PayPal: 3.2%Country Specific Card: 3.1%Gift Card, Pre-paid Card: 3.2%Other eWallet (Mercado Pago): 1.4%Other: 8.0%*

55.3%Credit Card

$25.6 billioneCommerce Sales Volume in 20114

43%

eCommerce Annual Growth Rate in 20114

23 millionOnline Buyers in 20115

84%

Share of eCommerce Market – Retail6

16%

Share of eCommerce Market – Travel6

BRAZILTHE MOST POPULOUS COUNTRY IN LATIN AMERICA, BRAZIL HAS THE HIGHEST VOLUME OF RETAIL INTERNET SALES.1 THE US $25.6 BILLION OF GOODS SOLD IN BRAZIL THROUGH eCOMMERCE IN 2011 WAS NEARLY FOUR TIMES THE eCOMMERCE MARKET IN MEXICO, WHICH RANKED SECOND.

CurrEnCy: Brazilian Real

rEpatriation: Difficult

inSiGHt: ONLINE PAYMENT PREFERENCES


Methods of Payment• Withan83.5%shareof

online transactions, credit and debit cards dominate online payment, due to rising disposable income and attractive promotions offered by card merchants.

• TheBraziliancreditcardmarket is dominated bydomesticbanks,withabout30.0%ofthecardsauthorized for in-country transactions only.7

• Interest-freeinstallmentpaymentsarepopular,drivenbylow credit card spending limits and some of the highest interest rates on credit cards in the world.8

Funding and Settlement windows• MerchantfundinginBraziltakes30days,withthe

credit card issuer settling funds on the 31st day after the transaction.

BOLETO BANCARIO

Boleto Bancario is a domestic, alternate payment method allowing customers to pay by cash, at a physical bank branch in their area, or using anATMmachine.Boletoscannot accommodate refunds.

About a third of consumers who use Boleto Bancario do not have access to online payment methods.9

Fraud Prevention • Asinanyemergingmarket,businessesshouldbe

prepared to diligently manage fraud in Brazil. According to a study conducted by CyberSource, the chargeback rateinBrazilis0.74%,onlyslightlyhigherthantheLatinAmericanaverageof0.63%,butsignificantlyhigherthantheUSaverageof0.41%.Theorderrejectionrateof5.6%ismorethandoublethatoftheUS,whichstands at2.5%.10

Restrictions, Mandates, and Legal Requirements

• Newlawsmandatethatretailersmustspecifythetimeofday when packages will be delivered.

• BrazilpassedtheCreditInformationLaw(CIL)inJune2011, which regulates “the creation and the access to databases related to credit information of citizens and companies.”

• AdraftDataProtectionBill2011andBrazilianInternetbill of rights is pending approval. As of 2011, there are no restrictions for cross-border data transfer.

• Foreignretailersfindthatlegalandtaxrequirementsmake eCommerce in Brazil a complex market to navigate.

• Brazilhassomeofthehighesttaxesanddutiesinthe world, much higher than in other Latin America countries.11

1. Consumer Finance Latin America, Euromonitor International Inc., 2011, 2.TrendsInBrazil’seCommerceMarket,ForresterResearchInc.,20113.MarketOpportunitiesAroundtheWorld,eMarketerInc.,2012,4.AmericaEconomica,2012,5.e-bitInformação,2012,6.VisaGlobalandLatinAmericaMarketShareReport,comScoreInc.,2011,7.CyberSourceCorporation,2012,8.GlenbrookeCommerceMarketAnalysis,GlenbrookPartnersLLC,2011,9.CyberSourceInternational eCommerce Survey conducted by ComScore, 2011, 10. CyberSource LatinAmericanFraudPreventionReport,CyberSourceCorporation,2012, 11.MarketOpportunitiesAroundtheWorld,eMarketerInc.,2012

of CrEDit CarDS in Brazil arE for in-Country tranSaCtionS only7

30%



eCommerce• Chineseconsumers,especiallythoseinsmallercities,

favorshoppingwithretailersthroughtheirTianMao*storefronts(formerlyTMall)ratherthanbrickandmortarstores.MajorforeignbrandswithstorefrontsonTianMaoinclude UNIQLO, Adidas, Levi’s and Gap.

• Withconsumersseekingmorevariety,qualityandservice, B2C eCommerce sales are expected to grow atafasterpaceandwillaccountfor~53.0%oftheeCommercemarketby2015.1

• About70%ofconsumersindicatedtheyshoponlineatleastonceaweek,comparedwitharound40%intheUSand the UK.2

• ForeignretailerslookingtoselltoChinahavetobuildtheir own delivery systems by creating a network of local couriers and third-party express delivery services.

• AccordingtoanOctober2011articleinForbes.com,fiercepricecompetitionandlogisticalchallengesseverelylimittheprofitpotentialofdomesticandforeigneCommerce businesses.


eWallets (Alipay, Tenpay, PayPal, etc.): 27.0%Online Bank Transfer/ Direct Debit: 15.0%Debit Card: 11.0%Gift Card: 4.0%Cash on Delivery: 10.0%Other: 2.0%*

31.0%Credit Card

* Other includes miscellaneous online payment methods, cash and check. Source: ComScore study 2011 commissioned by CyberSource.

$95 billioneCommerce Sales Volume in 20113

79%

eCommerce Annual Growth Rate in 20113

178.4 millionOnline Buyers in 20114

94%


6%


* OriginallyapartofTaobao,TianMaoorTMall,isadedicatedB2CplatformfeaturinghundredsofthousandsofChineseandinternationalbrands.Itisby far the most popular B2C website in China.

CHINACurrEnCy: Chinese Yuan (Renminbi)

rEpatriation: Very Difficult

AT ROUGHLY US $100 BILLION, CHINA’S ONLINE RETAIL MARKET IS ONE OF THE LARGEST AND MOST DYNAMIC IN THE WORLD. CHINESE CONSUMERS ARE RAPIDLY EMBRACING ONLINE SHOPPING – THEY ARE BUYING MORE FREQUENTLY, ACROSS MORE CATEGORIES AND SPENDING MORE PER PERSON EVERY YEAR. C2C SITES LIKE TAOBAO MARKETPLACE STILL DOMINATE THE LANDSCAPE.



Methods of Payment• CashonDelivery(COD)remainsoneoftheleadingonline

paymenttypesinChinaandisfrequentlythefirstoptionlistedatleadingonlineretailers.Manyconsumerspreferto inspect purchases prior to paying for them.

• SomecompaniescaptheamountthatcanbepaidviaCOD–Amazon.com,forexample,allowsCODpaymentsforuptoRMB20,000(approximatelyUSD$3,000).6

• MostpaymentcardsinChinaaredebitcards,andcanonlytransactin-country.DebitcardeCommercetransactionsareactuallyonlinebanktransfers(pushpayments).CertainChinesedebitaccountshavedailyspendinglimits–sometimesaslowas300RMB (USD~$47).

• Whileinitiallynottoocommon,creditcardsaregraduallybecoming popular with upwardly mobile online shoppers inChina.Manycardshavesingletransactionlimits,inaddition to daily and monthly limits.6

• Somebanksimposemonthlytransactionlimitsonpayment gateways like Alipay, for payments linked to banks’ credit cards. For example, CITIC Bank restricts its cardholderstoRMB1,000/month(USD~$155).

Alipay, owned by the Alibaba Group, is an electronic payment system similar to PayPal. It is the largest eWallet in China and extremely popular with consumers and retailers. Consumers need to register with Alipay in order to make payments. Purchases can be funded using debit cards, credit cards, and even cash.

Restrictions, Mandates, and Legal Requirements• RepatriationoffundsfromChinaisrelativelydifficult

for international businesses. Funds need to be routed through the State Administration of Foreign Exchange (SAFE).Further,therepatriationamountissubjecttomonthly limits.

• Businessescanaccessonlinetransactionfacilitiesfrompayment intermediaries only if they are domiciled in China and have Internet Content Provider and business licenses.

• Inmostinstances,retailersarerestrictedfromshippingdirectly to consumers. Instead, goods need to be routed through a local intermediary.

Most Chinese Online Retailers Support Alipay and Cash On Delivery

Base: 30 prominent online retailers within ChinaSource: Online Payment Preferences In China, Forrester Research Inc, 2011

Payment methods offered by leading retailers paint a different picture from the payment methods listed by consumers (see page 1). Retailers may need to reduce their reliance on eWallets and more traditional methods of payment like cash and postal remittance, in favor of debit and credit cards.

Alipay 96%

Cash On Delivery (COD) 93%

Direct Bank Transfer 66%

TenPay 53%

Postal Remittance 46%

99Bill 33%

China UnionPay 30%

PayPal 23%

Quick Money 20%

International Credit Cards 16%

1.GlobalizingEcommerce:WhatUSRetailersNeedtoKnowAboutEnteringForeignMarkets,eMarketerInc,2011,2.GlobalSurveyofMultichannelShoppers, PricewaterhouseCoopers LLP, 2011, 3. CyberSource Corporation, a VisaCompany,2012,4.http://www.emarketer.com,Oct2012,5.AsiaPacificOnlineTravelOverivewFourthEdition,NorthstarTravelMediaLLC,2011, 6.eCommerceMarketAnalysis,China,GlenbrookPartnersLLC,2010



eCommerce• OnlinebuyersinMexicotendtoberelativelyaffluent,

butpercapitaonlinespendingremainsquitelow.2

• TheMexicangovernmenthasspearheadedseverale-Government initiatives that are likely to spur wider adoptionofeCommerce.In2011,410,000Mexicans,the largest number of online tax payers of any country in the region, paid taxes using the web.

• Consumerelectronicsaccountsforalmostone-quarterofonlineretailsalesinMexicoanddigitalproductsand services are also very popular.3

• LiverpoolandMercadoLibrearetheleadingeCommerceplayersinMexico.4

* Source: AMIPCI (Asociación Mexicana de Internet), “Estudio de Comercio Electrónico México 2012” conducted by Elogia and sponsored by Visa, Nov 6, 2012

Online Sales Tactics Used by B2C eCommerceCompanies in Mexico, 2011 & 2012% of respondents

2011

2012

Discounts

Free shipping

No interest for a period of time

Freebies

Reimbursements

Other

75%67%

53%39%

38%57%

36%33%

18%

20%

11%

11%

Source: ComScore study 2011 commissioned by CyberSource.

PayPal: 15.2%Debit Card: 13.8%Online Bank Transfer /Direct Debit: 5.3%Mercado Pago: 2.3%Gift Card, Pre-paid Card: 5.2%Cash: 10%Off-line Wire /Bank Transfer: 6.2%Convenience: 1.2%Other: 4.3%


36.5%Credit Card

$8.0eCommerce sales volume projected for 20131*

billion 29.6%

eCommerce annual growth rate projected for 20131*

g ow**

grow2201013311*

8.4Online buyers projected for 20135

jecteddmillion 67%


33%Share of eCommerce Market – Travel6

*This projection does not include C2C transactions, taxes, and other payments made to the government.

MEXICOCurrEnCy: Mexican Peso /MXN

rEpatriation: Easy

MEXICO IS THE SECOND LARGEST eCOMMERCE MARKET IN LATIN AMERICA1, AND IS GROWING RAPIDLY OFF A SMALL BASE. HOWEVER, LOW BROADBAND PENETRATION, SLOW TECHNOLOGY ADOPTION, AND CHALLENGES WITH ONLINE PAYMENT OPTIONS CONTINUE TO HINDER eCOMMERCE PROSPECTS IN MEXICO.



Methods of Payment• DebitcardsfaroutnumbercreditcardsinMexico.

In2011,itisestimatedthattherewereonly25millionactivecreditcards(justoneoutoftenMexicanspossessesacreditcard)1ascomparedto83.8milliondebit cards and more than 100 million checks written over a three-month period.7

• NotalldebitcardsinMexico,however,canbeusedfor making online payments, making online payments difficultfortheaverageMexican.

• Newmethodsofpaymentareemergingtotapnon-cardholders. One such off-line payment system is DineroMail.Duringcheckout,theconsumerselectsDineroMailOXXOorDineroMail7eleven,entersname,email address, and phone number, and is redirected to theDineroMailwebsitetoprintoutavouchercontaininga barcode. The consumer then presents the voucher andmakesthepaymentatanOXXOor7elevenstore.

• Anotheralternatepaymentoptioninvolvescashpayments at bank branches for purchases made through low-cost travel websites.7

• SecurityofonlinepaymentswasthemostoftencitedreasonforusingofflinepaymentmethodsinMexico(49%).3

Restrictions, Mandates, and Legal Requirements

• MexicorequiresCVNforalleCommercetransactionsexcept those from merchants that initiate recurring transactions.

• Mexicohascomprehensiveprivacylegislationinplace.ThePersonalDataProtectionLawisrecent,andspecificrequirementshaveyettobedeveloped.Therearenoregistrationorothercross-borderprivacyrequirementsin the law at this stage.8

• Thelawincludesageneralrequirementthatdatasubjectsmustbenotifiedwhenadatabreachoccurs.

Mobile Payments• Atpresent,mobilephoneandsmartphoneownership

andusageinMexicolagsbehindthatofotherLatinAmerican countries like Brazil and Argentina, however, the trend is expected to improve in coming years.

• Aboutoneinfourmobilephonesinthecountryaresmartphones and not all owners subscribe to a data plan,preferringinsteadtouseWifilocations.9

58%

Projected Mobile Phone Users (% of population)

67.4millionProjected Mobile Phone Users

UsUUsUsesee UUUser

Source: eMarketer 2012, projections for 2013

33%

Projected Smartphone Users (% of mobile users)

22.2millionProjected Smartphone Users

ee ersrs


20%

Internet Users who have made a Purchase on their Mobile Phone

GlobalWebIndex “State of Global E-Commerce Report 2013”, 2013

1.eMarketer,20122.LatinAmericanOnlineRetailForecast,2012To2017,Forrester 2012 3. ComScore study 2011 commissioned by CyberSource 4.LatinAmericanOnlineRetailForecast,2012–2017,Forrester2012 5.eMarketer,20126.AMIPCI,20127.NewPaymentMethodstoBoost B2CEcommerceSalesinMexico,20128.BusinessSoftwareAlliance— http://portal.bsa.org/cloudscorecard2012/assets/pdfs/country_reports/Country_Report_Mexico.pdf9.eMarketer:MobileMexico:OvercomingObstaclestoGrowth, 2012



eCommerce• Lackofinfrastructuremakesithardforglobalretailersto

besuccessfulinRussia.Deliveryofgoodsishamperedby an unreliable, expensive postal system. An under-developedfinancialservicessectormakescashacceptance unavoidable.

• eCommerceinRussiaisdominatedbylocalplayers likeOZON.ru(similartoAmazon.com),thatclaimsmorethan700,000uniquevisitorswhospendmorethan$1million in sales every day. OZON.ru has its own delivery service, O-Courier, which operates in 130 cities across the country.2

• Despitelogisticalbarriers,eCommercesalesarestrongevenbeyondmajormetroareas.TheMoscowregionwasresponsiblefor45%ofallonlinesalesinRussiain2011,followedbySaintPetersburg(11%)andEkaterinburg(4%).FortypercentofalleCommercesalesin2011came from smaller towns.3

• Tobuildconsumertrust,onlineretailersinRussiaprominently display phone numbers and maintain extensive call center operations.

* Other includes eCheck, eWallet other than PayPal, prepaid card, etc. Source: ComScore study 2011 commissioned by CyberSource.

WebMoney: 12.5%Online Bank Transfer: 6.4%Yandex: 4.0%Offline Bank Transfer: 2.4%KIWI: 3.3%PayPal: 2.4%Other: 7.1%*


20.6%Credit Card

19.3%Debit Card

22.0%Cash

$17.5 billioneCommerce sales volume projected for 20134

21%

eCommerce annual growth rate projected for 20135

26.2 millionOnline buyers projected for 20136

55%


45%


RUSSIACurrEnCy: Russian Ruble /RUB

rEpatriation: Difficult


WITH THE LARGEST NUMBER OF ONLINE USERS IN EUROPE1 AND A RAPIDLY GROWING POPULATION OF ONLINE SHOPPERS, RUSSIA HOLDS CONSIDERABLE PROMISE FOR eCOMMERCE BUSINESSES. YET, SUCCESS HAS SO FAR BEEN LIMITED TO LOCAL FIRMS THAT UNDERSTAND LOCAL PREFERENCES AND ARE ABLE TO OVERCOME SERIOUS LOGISTICAL BARRIERS.


Methods of Payment• Exorbitantbankchargesandlackoftrustinelectronic

payments result in cash being the preferred payment methodinRussia,especiallyforphysicalgoods.Cardsoftenrequirepre-authorizationandcarddataisnotstored by merchants.

• Sincecreditcardsposesignificantfraudriskformerchants,Russianbusinessescontinuetofavorcash.

• Cardandonlinepayments,arehowever,gaininggroundon travel sites and for digital goods.

• Anumberofonlinepaymentsystemssuchas Yandex.Money(~14.0millionusers;20,000merchantsandWebMoney(~6.0millionusers,2,200merchants)are also gaining popularity. Customers fund them by linking these accounts with domestic bank accounts, debitcardsordepositcashthroughofflinestores/kiosks.These payment systems can have daily transaction limits.9

• Kiosks,whereconsumerspayforonlinepurchasesaswellasotherbills,areanotherformofpaymentinRussia.They can be seen on streets, supermarkets, small stores, etc. Sometimes, there are multiple terminals by different companies, creating a ‘payment island’.

Restrictions, Mandates, and Legal RequirementsRussiahasitsownapproachtoprivacylegislation.TheRussianlawhasmanysimilaritieswiththeEUDirective.However, enforcement of the law appears to be very limited.11

Mobile Payments• Mobiletrafficrepresentsjust3%-5%oftotaltrafficon

eCommercesitesinRussiaandtheshareofonlineorders made via mobile phones is even lower.12

• Still,serviceprovidersaretryingtochangethelandscape.QIWI Limited, a local payment services provider, and Visa Inc. formed a strategic alliance in 2012 to introduce a digital wallet providing consumers access to various electronic payment options.

76%

Projected Mobile Phone Users (% of population)

104.4millionProjected Mobile Phone Users

e UUse Use


35%

Projected Smartphone Users (% of mobile users)

36.6millionProjected Smartphone Users

e Users


17%

Internet Users who have made a Purchase on their Mobile Phone

Source: Nielsen: The Mobile Consumer: A Global Snapshot, 2013

1.eMarketer,20122.Fortune,20123.DigitalInsightasreferencedinInformilohttp://www.informilo.com/20120528/russias-e-commerce-boom-600,2012 4.eMarketer,20125,6,7.eMarketer,20128.PhoCusWright,2012 9.GlenbrookeCommercemarketanalysis,201110.http://www.informilo.com/20120528/russias-e-commerce-boom-600,201211.BusinessSoftwareAlliance–http://portal.bsa.org/cloudscorecard2012/assets/pdfs/country_reports/Country_Report_Russia.pdf,201212.Ystats,DataInsights,Live Internet, 2012

“It’s better for us to take cash rather than card in many cases since the cost per transaction by card is much more expensive for us. We’ve always supported cash payments, and in fact I believe this has been instrumental in establishing customer trust in us and getting us to our market-leading position.”10

– Maelle Gavet, Chief Executive Officer of OZON Holdings, a leading eCommerce company in Russia


ABOUT CYBERSOURCE

CyberSource Corporation, a wholly owned subsidiary of Visa Inc., isapaymentmanagementcompany.Morethan400,000businesses worldwide use CyberSource and Authorize.Net brand solutions to process online payments, streamline fraud management and simplify payment security. The company is headquarteredinFosterCity,California.CyberSourceoperatesinEurope under agreement with Visa Europe. For more information, pleasevisitwww.cybersource.co.ukorcall+44(0)1189907300.

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