1 | 8 www.thepaypers.com Copyright © The Paypers

Update on developments in online payments Vol. 5 Issue 16, 19 Oct 2012

News

Google to launch YouTube pay-per-view services in

India 1

Deckers selects Adyen for online bank transfers, alter-

native payments 1

Exclusive interview with Michael Burtscher, Payvision 2

Focus on: Cross-border e-commerce—the path to boost

online sales? 6

NetSuite integrates with AsiaPay US business management software developer NetSuite has integrated with Asian online

payments provider AsiaPay, to combine the latter’s PayDollar e-commerce payment

gateway and merchant services with the NetSuite SuiteCommerce platform. Read more

Google to launch YouTube pay-per-view services in India Google has revealed plans to roll out a YouTube pay-per-view service for users in India,

online media outlet thinkdigit.com unveils. The new service is expected to help the film

industry cope with the piracy provide consumers with more options to view movies. Read

more

Deckers selects Adyen for online bank transfers, alternative payments

Footwear manufacturer Deckers has selected Netherlands-based global provider of global

internet payment and e-commerce services Adyen to handle online bank transfers and

alternative payment processing for its online stores in Europe. Read more

Payza online payment system launches in Bangladesh Casada Technology Bangladesh, a group of business professionals, and financial institution

Bank Asia have introduced simplysend, a new online payment service developed by Payza,

an online payment processing platform. Read more

PNC Bank, Visa to release V.me by Visa Financial institution PNC Bank and Visa have entered an agreement to make V.me by Visa

available to more than 1.2 million PNC Virtual Wallet customer accounts, with a

commitment to make V.me available to more than 6.3 million accounts in 2013. Read

more

BofA Merrill adds online PIN check for corporate clients Global financial services provider Bank of America Merrill Lynch (BofA Merrill) has added

an online PIN check to its Commercial Card offering. The capability allows Chip and PIN

cardholders to view their PIN from any internet point. Read more

Update on developments in online payments

2 | 8 www.thepaypers.com Copyright © The Paypers

Vol. 5 Issue 16, 19 Oct 2012

Michael Burtscher is responsible for the further development of

Payvision’s global card payment network.

In his previous role as Head of Third Party Risk at Visa Europe, Michael

Burtscher successfully led a number of initiatives which increased

Security for consumers and payment solution providers in the e-

commerce market.

Payvision, an independent payment solution provider, specialized in global card

processing for the e-commerce market, offers acquiring banks, PSP/ISO and their

merchants a secure PCI-DSS Compliant, PSD Licensed international payment processing

platform, enhanced with innovative technology.

What is the message and the purpose of the white paper you have released in July

2012, dubbed “How to reduce the complexity payment service providers face in a

global e-commerce market”?

Michael Burtscher: Given the exceptional growth rates e-commerce has experienced

during the last decade, the traditional role that a payment service provider fulfills is

under pressure. For instance, there is pressure on pricing and more focus on efficiency.

Higher demands affect the position of major players in the market, so taking into

account the current developments, we argue that the amount of PSPs in business by

2015 will decline and the way PSPs will continue to provide added value in the future,

will change quite significantly also, in part, to respond to ongoing and changing

regulatory requirements. Furthermore, our White Paper is a comprehensive report of

the different challenges stakeholders face in this payment industry. Relying on our

experts’ knowledge and our decade of experience within the payment environment,

we wanted to provide support and guidance for other players and to share our

expertise. In the end, we all face similar challenges, so why not sharing our best

practices to sustain the industry technological innovation and development, by

providing solutions on a non-competitive basis?

From a PSP perspective, what key metrics are there in measuring a successful

implementation of a payment strategy? What key factors do you take into

consideration?

Michael Burtscher: First of all, a PSP clearly needs to have a rigorous business plan, it

needs to make sure its financial proposition is accurate. When we work with PSPs we

always pay great attention to this aspect, as financial risk needs to be mitigated

appropriately.

Secondly, a very important metric is PCI DSS compliance. They need to be compliant or

demonstrate they are in the process of becoming so. Of course, this is mandated by the

Card Organizations, but it also demonstrates that the organization has a sufficient level

of complexity, structure and maturity to be able to seriously address the most essential

aspects of data integrity and security.

Finally, an aspect which is becoming increasingly important is that many PSPs and

other similar organizations need to have the appropriate regulatory approval. For

instance, in Europe, if PSPs receive funds on behalf of their merchants they need to

have a Payment Institution license, or such-like depending on the jurisdiction, to do so.

This can be a rigorous, time-consuming, as well as expensive process but again it

demonstrates that the organization is fit for purpose.

The growth of the PSP market is directly attributable to...

Michael Burtscher: From my point of view, the growth of the PSP market cannot be

pinned down to one single factor, although as previously said we believe that we will

soon see a downward trend in the number of these organizations. The first factor is

undoubtedly the emergence and growth of e-commerce, which has allowed these

companies to develop their e-commerce technology, discovering new opportunities.

“PSPs need a rigorous business plan to attain long-term success”

- Exclusive interview with Michael Burtscher,

Payvision-

Update on developments in online payments

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Vol. 5 Issue 16, 19 Oct 2012

Traditionally, acquiring banks have been focused on one type of model, one type of service

provision for the merchants. Today, merchants need different types of infrastructure,

complex risk monitoring, multi-currency processing and settlement which, among others,

are services that increasingly have been provided by the PSPs. They can offer more hands-

on expertise in terms of supporting the business; they can “aggregate” the volumes for

multiple small merchants, thus being able to offer a better pricing. An acquiring bank will

not focus on the very small merchants, given their volumes, whereas a PSP can provide

this aggregation, whether it is in the e-commerce environment or, increasingly in some

markets, also in the face-to-face environment.

Another interesting factor is that, in the past 18-24 months, in Europe, a large number of

PSPs have become direct members of the Card Organizations, alerting the traditional

acquirers that these organizations have developed over the years sufficient expertise to

completely disintermediate the traditional acquirers, especially in the e-commerce space.

What are the most important factors that determine merchants’ choice of a certain PSP?

Michael Burtscher: Well, clearly, the price of the service is always taken into account (and

we can refer to cost per transaction, monthly fee for account management and so on).

However, we noticed a fluctuation of decisions - some merchants will rather pay less for a

basic package, but some of them will be willing to pay more because of the other added

value services a PSP can provide, like website design optimization or geographical

expansion support. In Europe, for instance, there is a growing number of merchants who

will decide on the value added services, even though they might pay a bit more for their

transactions, but they get a service which allows them to increase their sales.

Another important solution a PSP can provide, hence differentiate its offer, is the active

support in fraud and chargeback management. Furthermore, as merchants expand

globally, they process transactions in many currencies, thus they want to insure

themselves against the FX spread. This trend is becoming more and more important and

requires a feature that not many organizations can provide. At Payvision, for instance, we

offer more than 150 transaction currencies and all regional card settlement currencies, as

supported by VISA, MasterCard and other major card schemes. Another interesting fact for

European merchants is VISA Europe’s mandate effective 1st of January 2013, when

merchants will be required to only use merchant agents which have been validated

(https://www.visamerchantagents.com/).

In your opinion, what should a PSP do from a strategic point of view in order to remain

competitive?

Michael Burtscher: They must have a robust technical infrastructure, sound risk management

and provide good reliable solutions in terms of fraud and chargeback management. Besides

these “Must Have” tools, a competitive PSP has to remain relevant, to observe the market,

both in terms of technology and innovation, but also geographic expansion. This approach

will enable the PSP to take wiser business decisions and to stay ahead of the curve.

For instance, one of our PSP partners told us that the reason they chose us as their partner is

because we have a good DNA and hence felt that this affinity would be good for their

business, too. Indeed, we are very caring and attentive to the needs of our clients, taking the

time to understand their own objectives and supporting them to achieve these goals.

Is there price pressure in specific market segments?

Michael Burtscher: Yes, certainly. If you look at the traditional brick-and-mortar retail

environment, it is undoubtedly challenged by tighter profit margins and the ongoing and

persistent global recession’s impact. While, in this digital age, e-commerce offers more

maneuverability as well as greater opportunities for growth and increased profitability:

indeed, e-commerce continues to see double-digit growth across the board and in some

markets even triple-digit growth.

“The most successful PSPs are the ones with entrepreneurial vision, hands-on ap-

proach and actively involved in understanding the essence of their company evolu-

tion; they have to establish a positive culture within the organization, and focus to

overachieve its goals. The human connection is definitely very important, and it re-

quires knowledgeable, flexible people, very professional and performance driven.”

Update on developments in online payments

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Vol. 5 Issue 16, 19 Oct 2012

Some value added e-business services that payment service providers can offer to enhance

their proposition/ business model are...

Michael Burtscher: Multi-currency, as I said before, is a service more and more requested by

the merchants. Expanding globally offers many opportunities to the merchants, but also many

challenges. To enable the merchant to settle transactions in as many currencies as possible, is

one of them.

Recently, through our partnership with Rentabiliweb who offer multiple payment solutions,

we provided the French e-Merchants with access to a wider choice of payment methods and

the ability to settle in local currencies, enabling them to better manage FX liabilities.

E-invoicing services are a very trendy feature which, as part of the back office reconciliation

services, allows merchants to streamline their accounting flows. If linked to an end-to-end

solution, PSPs are then able to provide even more complex back office and financial services

to their clients.

I have recently heard about a solution for consumers, which allows them to store all their

receipts in an electronic system. Therefore, such paperless and optimization tools for the

financial flows are an added value feature for the PSPs, enabling them to offer it both to their

merchants and consumers.

Reporting and data analytics. Big companies like Groupon or Starbucks are very strong in this

area, they have a large customer database and they can provide trending reports to their

merchants or retail outlets, with meaningful insights into their customer’s purchasing habits.

Many acquirers and PSPs have vast databases, but they do not necessarily know how to

exploit it effectively, since it was not primarily designed for end consumer data analytics. A

competitive PSP will see the value in providing such analytics to its merchants, being an useful

way for a merchant to increase its sales volumes. Moreover, it should help create loyalty and

build trust among PSPs’ clients.

With the success of several PSPs in the marketplace lately, it has spurned an increase in the

amount of companies wishing to be setup as a PSP, especially new start-up companies.

Your recommendation to any new PSP would be...

Michael Burtscher: A company wishing to become a PSP needs to be aware that there are

fewer opportunities than there were 10 years ago, although developments in new

technology, such as in the m-commerce space, will always offer golden opportunities to the

savvy and innovative ones.

However, one must also be aware that in some instances an organization may have little

choice but to become a PSP since the Card Scheme rules have been defined more clearly.

Therefore, if an organization wants to offer certain services, it cannot avoid becoming a PSP,

Payment Facilitator, or e-wallet. As a recommendation, even before starting, a PSP needs to

understand whether it must have regulatory approval for the services it will provide, and if so,

what kind of license it needs. In addition, a very important requirement for a PSP is to be PCI

DSS Compliant; if you don’t have a Qualified Security Assessor (‘QSA’), get one! Finally, a PSP

has to make sure it really understands who its competitors are. It can happen, that one looks

at the big companies like PayPal or Google Wallet as one’s competitors; but one should not

be blinded by ambition and have a more realistic understanding of who one will be competing

against.

Given the global nature of e-commerce, a real competitor could be located in the same city or

on the other side of the World. A new PSP needs to understand who is likely to pitch for the

same customer base. If it doesn’t know its competitor’s offering, the pricing, the trends, the

innovation and technology standards, it cannot understand what others can or cannot offer

comparing against one’s own offer. If a new PSP doesn’t understand its competitor’s offering

how can it credibly hope to convince a customer to place its business with it or to switch over

from a possibly longer and better established payments provider?

Update on developments in online payments

5 | 8 www.thepaypers.com Copyright © The Paypers

Vol. 5 Issue 16, 19 Oct 2012

Cross-border e-commerce: Domestic payment methods are the guarantor for more sales

By Markus Rinderer, CEO PAY.ON AG

Markus Rinderer is the CEO of PAY.ON. Markus Rinderer is

responsible for strategic planning and development, human

resources as well as key account and product management.

Previously, he was responsible for various product developments at

Germany’s leading payment service provider.

PAY.ON AG is a provider of payment and risk management technologies and global

processor of online payment transactions.

The company operates two processing platforms, namely PayPipe, a large independent

payment routing gateway and PaySourcing, a white-label Platform as a Service (PaaS)

enabling clients to start a payment business within 48 hours.

The top guarantor for high conversion rates is to meet consumers’ expectations at their

best. Regarding payments this means a customer-friendly payment page as well as the

unrestricted availability of all well-known domestic payment methods. This is especially

true for cross-border e-commerce. The best practice to meet the payment method

challenge is that payment service providers support each shop with a simple and flexible

global payment solution from a single source. That´s exactly what our PayPipe routing

gateway offers. It contains several hundred of payments providers including nearly all

schemes worldwide – directly available and ready to be connected to. This way, merchants

also meet the requirements of their foreign customers simply and swiftly over only one

single API.

Besides availability, PSPs have to select the right payment partners to accelerate cross-

border sales for their merchants. This relates to the schemes but also to the infrastructure

providers as acquirers. The experience shows that it is necessary to integrate also local

acquirers, even if the used acquirer has got a cross-border license for e.g. Europe. Contrary

to the general knowledge e.g. VISA co-branded debit cards are not processed European

wide by one single acquirer in the way you would necessarily expect it. Local acquirers

offer here a better support for many reasons: the acceptance of local debit cards is fully

guaranteed which leads again to higher conversion rates and PSPs can directly take

advantage of lower transaction rates offered by the local acquirers. In general, you can use

one single acquirer for European wide business, nevertheless you have to expect

significantly lower conversion rates and higher transaction rates in countries with a high

debit card penetration such as France or Spain.

The third aspect that needs to be taken into account for more success in cross-border e-

commerce is the right selection and adjustment of risk checks – in order to effectively

prevent fraud as well as to positively influence the conversion rate. The bad news is that

there is no master plan, every country has its own risk and conversion rate challenge. The

selection of best matching checks is mostly sophisticated.

Additionally, the analysis of promising risk checks to evaluate the final settings requires

first of all integration and then time. Here, our PSP platform-as-a-service PaySourcing

offers market participants a quite easy way to put this into practice. Besides all other

advantages, it contains more than 120 fully integrated, internal risk checks including highly

specialized external risk management providers such as Schufa, ThreatMetrix or ReD

Shield. Due to the bandwidth and granular adjustability, the risk level can be controlled on

a per dealer basis in line with requirements. In this vein, the solution also provides real-

time evaluation, blacklists, scoring models, as well as all verification methods such as

address and credit status checks.

EXPERT OPINION

Update on developments in online payments

6 | 8 www.thepaypers.com Copyright © The Paypers

Vol. 5 Issue 16, 19 Oct 2012

Due to the continuous development of the e-commerce sector in Europe, an increasing

number of retailers have expanded their businesses via multiple channels to enable

consumers to complete a purchase via the online and mobile channel.

In a permanent endeavour to gain more market share, or simply to reduce production

costs, they have also turned their attention towards cross-border e-commerce, which is

seen as a great opportunity to boost international sales. According to the “European cross-

border e-commerce: The challenge of achieving profitable growth” report released by

global management consulting Accenture, one quarter of European retailers have declared

that revenues could increase by 25 percent or more if they could sell both online and cross

-border across Europe.

However, providing cross-border e-commerce services always comes with numerous

challenges and legal constraints and the European space makes no exception. The

situation is not easy for online shoppers either. When trying to make purchases from other

countries, some of them feel discouraged by the barriers they encounter and decide to

buy from local retailers. The same study shows that only 8.8 percent of Europeans are

currently buying online from retailers located in other countries.

As already mentioned, taking an online channel cross-border leads to a number of changes

in the business model of a certain business and retailers face a lot of challenges ranging

from traditional market-entry issues to online set-up and day-to-day operations.

• Market Entry Challenges

According to research by Accenture, respondents believe that the top three barriers to

cross-border market entry are the cost of building brand awareness (42 percent), the small

scale of some markets (42 percent) and unproven demand (37 percent). Data also

indicates that 36 percent of European retailers have mentioned product specific issues as

another constraint. For instance, electronics are easy to search online as the products are

branded, but it is very hard to make money from selling them online due to low gross

margins.

• Online Set-Up Challenges

The same source points out that building any online brand in a new country is expensive

and trying to adapt to a diversity of legal and fiscal regimes considerably increases the cost

of market entry. Thus, retailers need to adapt their IT systems to reflect each individual

country’s distinctive features and develop call-center, delivery and returns capabilities to

match them.

The study points out that the laws and regulations have had an impact on their EU cross-

border trading online. Therefore, according to the results, 47 percent of respondents have

been affected by product return laws, 42 percent by cost of compliance with different

national fiscal regulations, 40 percent have confronted themselves with country

differences in retailers responsibility for disposal and recycling of waste while 38 percent

have faced constraints with regard to packaging/labeling laws.

CROSS-BORDER E-COMMERCE - THE PATH TO BOOST ONLINE SALES?

47%

42%

42%

42%

39%

38%

38%

Product returns laws

Cost of compliance with national…

Cost of compliance with national…

Differences in labour laws

Credit processing laws

Planning regulations (affecting…

Differences in packaging/labelling…

Source: Accenture European E-commerce Survey

Impact of laws and regulations on cross-border e-commerce

Update on developments in online payments

7 | 8 www.thepaypers.com Copyright © The Paypers

Vol. 5 Issue 16, 19 Oct 2012

• Day-to-Day Operating Challenges

The report also mentions a series of specific, cost-related issues that have had a high

impact on retailers’ business profitability when operating cross-border. While different

product returns laws had by far the highest impact for 47 percent of respondents,

difficulties in handling returns cross-border have been cited by 44 percent of them. IT

system limitations including handling multiple tax rates and multiple languages have had a

major impact on 39 percent of retailers, while 38 percent of them have declared that

fragmentation of payment system (local cards, online banking system) represents a serious

issue.

The Accenture research also points out that most traditional retailers consider multi-

channel sales as a great opportunity to top-up their profits and therefore they first focus

on making online pay locally before going cross-border. However, adopting a multi-

channel strategy also raises a lot of technical, operational and organizational constraints

that retailers need to overcome in order to make their business successful. The bottom

line is that both multi-channel and cross-border e-commerce are exceptional opportunities

to increase revenue. But due to a series of barriers and also as a result of different levels of

development and market maturity, this may be more challenging than expected.

Accenture’s a survey is based on a sample of 146 retailers with more than EUR 100 million

in annual revenues across six retail sectors including grocery, home goods, consumer

electronics, clothing, toiletries and leisure goods and seven European Union countries,

namely Denmark, France, Germany, Italy, Poland, Spain and the UK.

With the rise of middle class economies, volume and transacted values have increased

tremendously creating a banking boom. As more and more people now work overseas

with mobile phones and internet access, mobile and e-banking are seen as being a

powerful driving forces used to transact funds. This is followed by rapid growth of

consumer spending, accompanied by credit growth of more than 20 per cent.

As the numbers of your transactions increase, you will need to update, implement and

enhance your settlement systems, technologies and techniques to empower you to meet

the escalating needs of your customers as volumes and transacted values increase.

Payments, Settlements and Remittances 2012 allows you to modernize your payment

systems securely and efficiently when you mitigate settlement risks and penalties in the

face of increased transactions during this critical period of banking boom.

Asia’s most informed meeting place for central banks, commercial banks, settlement

systems architects and connected payment services providers

Call +65 6818 6344 or email payments@arcmediaglobal.com

UPCOMING EVENT

44%

39%

38%

37%

34%

Potentially higher costs due to…

IT system limitations

Fragmentation of payment…

Higher costs for cross-border…

Different VAT levels

Source: Accenture European E-commerce Survey

Impact of local constraints on cross-border e-commerce

Update on developments in online payments

8 | 8 www.thepaypers.com Copyright © The Paypers

Vol. 5 Issue 16, 19 Oct 2012

In the next editions of the Online Paypers newsletter, we will continue to focus on some of

the most important developments and initiatives in the online payments and e-commerce

space, structured per regions, in parallel with a series of exclusive interviews with

representatives of payment services providers whose role on the online payments market is

not difficult to define: Ogone and Intrum Justitia.

If you would like to contribute with an expert opinion on any of the topics above or make

any other suggestions, do not hesitate to contact us at adriana@thepaypers.com.

The Online Payments Market Guide 2012 aims to put together a comprehensive

overview of the global e-payments ecosystem, mapping out on-going developments,

success stories and industry players in the market. The Guide is designed to be the

most complete and up-to date reference source for the e-commerce markets on

vendors in the global online payments industry. The Guide is designed to be the

most complete and up-to date reference source for the e-commerce markets on

vendors in the global online payments industry.

For leading market players who wish to provide their successful initiatives with in-

creased market exposure, the Guide offers the chance to present their products and

services more in-depth (in Part 2) and share their vision on success in the online pay-

ments industry with The Paypers global readership. Also, Part 3 of the Guide allows

companies to present their products and services offering in a manner that is fo-

cused, structured and deeply informative.

The 2012 Guide is endorsed by The Merchant Risk Council (MRC), the merchant-led

trade association focused on electronic commerce risk and payment strategies and

Ecommerce Europe, an association representing companies selling products and/or

services online to consumers in Europe.

To learn more about the Guide and download the official brochure, please visit the

dedicated Online Payments Market Guide 2012 page.

YOUR OPINION IS IMPORTANT TO US!

About: Online Paypers is a bi-weekly update on developments in online payments by The Paypers, the portal for

payment professionals.

Editors: Adriana Screpnic, Mihaela Mihaila, Ionela Barbuta and Melisande Mual.

Website: For more information, please visit our websites: www.thepaypers.com

Contact: For more information, you can contact us at: info@thepaypers.com

Subscription info: Online Paypers is a product of The Paypers and is published 24 times per year. Year

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Copyright: 2011 © The Paypers. All rights reserved. Reproduction or redistribution in any form without explicit

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