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E Money 2010 Oct09

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Special Report for The Times

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  • 1. This supplement is an independent publication from Raconteur Media 27 October 2009 e-MoneY 2010 Welcome to the world of electronic money E-money is the lifeblood of mail order businesses, especially those firms that operate on the Internet. But what are the perils and pitfalls of accepting e-money as a form of payment? Steve Gold discovers that e-money is lot more than just plastic cards... G reat strides have been worse, transactions - like cheques - and monthly minimums. Although sor. Charges for both these primary ess where a professional transaction made to offer the can be returned some time after they convenient, these e-money (electronic professional transaction processors processor is involved – has a higher consumer numerous are processed. If the cost of leasing a money) services can work out to be an vary and are – like so many aspects of chance of a chargeback occurring. choices in ways to pay card terminal and paying a minimum expensive option and thus it is crucial card acceptance arrangements – sub- Chargebacks are incurred when- electronically. The regulatory au- monthly charge to the transaction to draw up a cost analysis. ject to negotiation. ever the cardholder disputes the thorities, notably the Financial Serv- processor is factored in - plus a myriad As a general rule of thumb, the transaction – for any reason – and ices Authority and the Information number of extra charges, such as 3 to 5 online professionals transaction processor’s control of the card issuer starts an investigation. Commissioners Office, have been pence card authorisation fees, 50 to 75 Online businesses wanting to accept verifying the identity of a debit card- The process can take some time but instrumental in ‘keeping up’ with pence card refund fees and commis- electronic money can opt for an on- holder seems less rigorous than with a it is normal for the retailer to see the the internet revolution. sion fees of up to 5 per cent on some line transaction processing account credit cardholder. value of a disputed transaction (the For the retailer that sells goods or lesser-known cards - the process of ac- from companies such as Sage Pay Anecdotal evidence suggests that this chargeback) taken from their avail- services online the playing field seems cepting cards can start to grossly affect and Worldpay, to mention but a few. is because with a credit card cardhold- able card transaction balance for a less than level, since consumers have a company’s profits. Both firms are well established; with ers are effectively spending the card is- period of between 30 and 60 days. the benefits of regulation and legisla- It’s for this reason that a grow- Worldpay part of the RBS Group’s suers’ money, whilst with a debit card, After this period, when a dispute is tion on their side, whilst there is much ing number of smaller businesses are Streamline operation and Sage Pay the bank or building society can re- resolved, the funds are either placed fraudulent activity on the Internet. turning to online e-money firms like the result of a recent merging of move the money straight out of a cus- back into the retailers account or the The bad news with payment cards is Paypal and NoChex that process card brands between Sage, the account- tomer’s bank account. For an online chargeback is confirmed. that the card issuers can reject a trans- transactions for online merchants ancy/business software specialist and retailer, this can mean that a debit card action for a variety of reasons. Perhaps without the need for card terminals Protx, the online transaction proces- transaction – though cheaper to proc- continued on page two Painless transactions A roadmap to e-invoicing Business compliance Completing transactions online is no Why not send your invoices electronically? Since fraud is a major obstacle, companies longer a sticking point. We take a look It saves you time, money, effort and an must factor security compliance into their at the major providers. page 4 awful lot of paper. page 8 proposition. pages 14-15 Keep your e-money moving www.sagepay.com
  • 2. 2 E-MONEY 2010 continued from page one Howes says that Chip and PIN is a Fortunately for businesses, UK classic case of this ‘management by com- banks are not run by goblins, as is Retailers with a store frontage have mittee’ approach. The Chip and PIN the case in the world of Harry Potter, the advantage of having a customer technology, he explains, was originally but for most online businesses – as signature or PIN verification to wave developed and used in France in the well as traditional retailers expand- at their transaction processor. Online 1980s and, by the time it rolled out in the ing online – the choices are many merchants have no such protection. If UK, the technology was actually 20 years and varied. Conversely, businesses of the cardholder wants to cause prob- old. “Will e-money take off? It’s going to all sizes can seek out the best trans- lems for the retailer they can, and quite take a lot of time. UK banks are rather action processor for them as well as frequently it seems that they do. like Gringotts Bank in the Harry Potter going some way to keeping fraud and Curiously, most transaction proc- novels. Very archaic and traditional.” potential chargebacks at bay. essors impose a transaction fee for processing chargebacks and refunds. This means that, even if the cardholder The elecTronic money aSSociaTion dispute is found to be invalid and the funds are released back to the retailer, the fees are still imposed. 15 years ago, the banking industry initiated projects to replace physi- This, unfortunately, is the price cal cash with an electronic equivalent or e-cash. With some initiatives of doing business. For online retail- based around payment cards and some using electronic networks, ers, there is little option but to grit most met with limited success; consumers did not see a compelling their electronic teeth and suffer the Pin verification can serve as protection for retailers in chargeback disputes reason to move away from cash. death (or so it seems) of a thousand The advent of the Internet brought with it opportunities for electronic micro charges. authentication model of 3DSecure net and e-money veteran whose ex- payments that exploited limitations of alternative products. The introduc- (Verified by Visa and Mastercard Se- perience dates back to the 1980s, says tion of an instant means of payment by PayPal, Moneybookers, Click and low-value e-MoneY curecode) to allow a user to create a that whilst banks always appear to be Buy and others provided a real consumer advantage. Today, the segment transactions one-time pictorial PIN that authenti- trendy they rarely innovate unless it has more than 250m users worldwide, accounting for some 10% of global Visa and Mastercard are busy trialling cates the cardholder. Howes, an Inter- suits them. “This means that innova- consumer e-commerce.The story of prepaid cards provides a number of a low-value (typically sub ten pounds) tive e-money services like Mondex and insights into changes in approach that have led to recent success. Prepaid “ initiative – respectively branded Pay- Paypal invariably get swallowed up by cards have become mainstream in the USA, and now are on the threshold Wave and PayPass – where a user has a smart card with an embedded radio Even if the banks and big business and either qui- etly buried (like Mondex) or repack- of growth in Europe. They have succeeded by focusing on clear and well defined consumer propositions; providing electronic alternatives to gift wave-enabled chipset. A good exam- ple of this is the Transport for London cardholder aged (like Paypal),” he says. “Visa and Mastercard have an inter- cards, travellers cheques or store cards.Gradually, more general purpose cards are beginning to find their way into the market, meeting the needs Oyster card. Despite some early prom- ise, the aforementioned cards have dispute is found esting approach in this regard. They say ‘we are a membership organisa- of the unbanked, those preferring not to use their credit card online and those seeking a budgeting tool for better spending control. never been engineered for use online and away from the real world. to be invalid and tion’ and, as a result, everything gets done by committee and takes an age Furthermore, these have been largely marketed as retail consumer products rather than traditional financial services products;. adver- According to Steve Howes who is chief executive of Gridsure, a UK- the funds are to be agreed upon and eventually tri- alled,” he added. tised and sold in supermarkets and convenience stores as well as bank branches, their branding more in common with consumer goods based company that has developed a pictorial alternative to the PIN system released back According to Howes, this effectively stifles innovation in the e-money than with Traditional financial products. Increasingly alternative outlets are also being used, such that most of us use with our payment cards here in the UK, the current situa- to the retailer, business. One may draw the conclu- sion therefore that despite the media as money transfer agents, travel agents, and online financial services sites, targeting specific consumer segments. tion with e-money is unlikely to change the fees are still hype over alternative payment tech- The outlook for both online and card based products is good, and ” going to arrive? for the foreseeable future. Gridsure is nologies, most businesses will be ac- the maturing of mobile and (contactless) technologies promises a rich a personal identification system that extends the standard ‘shared-secret’ imposed cepting card payments in their current form for some time to come. and diverse payments environment for the future. is e-money ever may have (or claim to have) taken back merchandise to a merchant in return for a credit, but the credit was never posted to the account. In this example, the retailer is responsible for There are more e-money alternatives for retailers than which helps the transaction processor situation, a card is used without the issuing a credit to its customer, and – and the retailer – understand why consent or proper authorisation of the would be charged back. you would think but it may be more difficult to prove the chargeback has occurred. cardholder. In many cases, a retailer is Other types of chargebacks relate their side of the case where a chargeback is involved Reason codes vary by card issuer responsible for charges fraudulently to technical problems between the J and network, but fall in to four imposed on a customer. Mostly, merchant and the issuing bank, ust to make life interesting, where a chargeback is involved. It’s general categories: however, fraudulent card transactions whereby a customer was charged twice there are a lot more e-money also worth noting that US transac- n Technical – Expired authorisation,  originate with criminals who gain for a single transaction (duplicate options available for online tion processors are normally outside insufficient funds, or bank access to secure payment card data and processing) for instance. retailers. These include e-gold of the reach of the Financial Serv- processing error set up schemes to exploit that data. Against this backdrop, a number of and Neteller, for instance and many are ices Authority meaning that you may n Clerical – Duplicate billing, incorrect  Chargebacks can also result from a players in the financial industry have mainly based in the US. need to hire a US lawyer if you hit any amount billed, or where a refund was customer dispute over a return. This tried to launch e-money initiatives but These services are often priced very serious problems. never issued type of chargeback is usually described to date they have all either failed or been appealingly but the downside is that There are many reasons for a n Quality – Customer claims to have  as credit not processed. A customer snapped up by big business. your transactions – and those of your chargeback to be issued ranging never received the goods or service customers – are normally charged in from ‘buyer’s remorse’ – where promised at the time of purchase US dollars, meaning both sides take the buyer has second thoughts on n Fraud – Customer claims they did not  Published in association with: a modest ‘hit’ on the exchange rate their purchase – right through to authorise the purchase, or have been commission front. real criminal card fraud. With each the victim of identity theft Added to this, anecdotal evidence chargeback the card issuer usually One of the most common reasons Electronic suggests it’s a lot more difficult for selects and submits a numeric ‘reason for a chargeback is a suspected or Money retailers to prove their side of the case code’ to the transaction processor, actual fraudulent transaction. In this Association e-money 2010 Distributed in publisher: Jamie Simon editor: Tobias Kelly For more information about Raconteur Media publications The information contained in this publication has been obtained from contributors: Steve Gold, Andrew Gellatly, Barnaby in The Times and The Sunday Times, please contact Freddie sources the proprietors believe to be correct. However, no legal liability can Page, Ron Condon, Rod Newing, Thaer Sabri, Bob Russo Ossberg T: 020 7033 2100 E: info@raconteurmedia.co.uk be accepted for any errors. No part of this publication may be reproduced Design: Hervé Boinay, Steve Burgess W: www.raconteurmedia.co.uk without the prior consent of the Publisher. © RACONTEUR MEDIA
  • 3. E-MONEY 2010 3 PROMOTIONAL FEATURE airPlus transforms corporate card programme at BT When BT needed a global card provider to streamline its corporate card operations, it looked to AirPlus International for both its lodged and corporate card solutions STreamlined ProceSSeS W ith 60,000 regular travel- BT is aiming to increase the number of In the UK, only a very small percent- lers, each making more expenses processed through the lodged age of people pay their cards by direct than 12 expenses claims account, ultimately reducing credit lim- debit, so AirPlus introduced a wider per year, it is essential its on the individual cards, saving costs range of ways in which people can pay, that BT has an efficient process to han- and reducing company risk. AirPlus including by phone and via internet dle travel expense claims. BT’s growing works closely with BT’s travel agent for banking; in June, AirPlus added on- international activities also mean that scheduled flight bookings, and will soon line payment, through its own portal. any management system needs world- start incorporating budget airline and The range of payment options has also wide coverage in order to consolidate train bookings into the lodged account. helped to reduce late payments. and centrally process global data. With central settling, frequent travel- Gaynor Martin, global corporate card lers do not need to receive thousands global prograMMe manager at BT since 2003, explained: of pounds from BT and be left with the By switching to AirPlus, BT has been “In 2008, it was decided to overhaul responsibility for paying that to the card able to implement a global programme, Of particular value to Gaynor’s team is being able to have the centrally BT’s corporate card programme for a provider. BT has already seen a reduc- and Gaynor is able to see worldwide settled account visible to line managers. more efficient, streamlined process. We tion in non-payments since starting the data through the AirPlus Information “Claiming all expenses through the Oracle system, part of which is looked for a self-issuing card provider, new programme. Previously, somebody Manager online reporting tool. From centrally settled and another part paid to the employee, was a brand because our UK card base is simply could buy a flight one month using the October 2008, when the UK operations new scheme that AirPlus did a lot to help us develop, proactively too big to work through a third party. individual corporate card and go on the were still in the planning stages, AirPlus communicating with the Oracle consultants. We also felt that a lodged card account trip the next month when the bill came solutions were already being rolled out Oracle automatically allocates all flights to the budgets, and every was a key for moving the programme in, accruing interest unnecessarily; with in 20 other countries, through partner individual can see their flight costs, as well as the costs on their forward, to centrally settle pre-trip a lodged account, it is automatically issuers for the individual cards. individual cards. The link with Oracle makes it so much easier to handle travel costs like air fares, train fares and paid so there is no delay. Gaynor elaborated: “One of the ad- the information.” car hire. However, full central settle- vantages of being with AirPlus is that, “ ment would not be suitable for BT; the although the cards are issued by a part- Company deals with a range of different ner issuer in different countries, there is businesses, and in some sections, like BT After a lengthy an AirPlus presence in every one of exPenSeS ProceSSed overniGhT Retail, for example, the sales force and those countries, ensuring that a direct field managers need cards at hand for and detailed line of contact is maintained between Gaynor said: “Many of our previous systems have been replicated with on-the-road travel expenses, particu- larly petrol costs.” tendering process, BT and AirPlus.” As BT continues to develop its corpo- AirPlus, and the programme has improved significantly. With the AirPlus tenDering process BT eventually rate card programme, AirPlus has been adaptable to BT’s unique requirements. Company Account lodged card, we now have centrally settled scheduled air fares, which has been a huge step forward. After a lengthy and detailed tendering process, BT eventually chose AirPlus chose AirPlus “AirPlus has been extremely flexible in setting up exactly what BT needs, and With the AirPlus Corporate Card, expenses incurred through individual business cards are processed over- International for its corporate travel payment solutions, starting implemen- International for came up with some innovative ideas to tackle certain challenges. Its representa- night, to pre-populate the account for when the employees claim their tation in January 2009 and achieving full operation by April with both lodged its corporate tives have also been very receptive and responsive to any requests that we have expenses. Each of the pre-populated credit card transactions is justified and individual cards. By August, 20,000 travel payment made, even as far as how the statements for tax purposes, and any cash or ” cards had already been issued in the UK, would look. AirPlus has been excellent mileage are added. The new system and other regular travellers continue to solutions in helping us to optimise our expenses has been a big time-saver for us.” be encouraged to apply during 2009. handling processes,” Gaynor concluded.
  • 4. 4 E-MONEY 2010 Attracting customers online is the easy bit – taking their money has always been harder. But the payment service provider takes the pain out of transactions, writes Barnaby Page E -business works because it shrinks the distance and time that historically so often separated willing buyers – be they consumers or businesses – from sellers offering just the right goods and services. But while the Internet quickly made contact between sellers and Putting money customers much easier to establish, completing the transaction with a payment was often a sticking point. Accepting an order online is one thing; sending money in a way that’s secure, reliable and cost-effective for both parties is a good deal in your pocket more complex. While the big banks and credit-card companies have now accepted the reality of online business, with divisions like The Royal Bank of Scotland Group’s WorldPay supporting online business as eagerly as real-world transactions, their early laggardliness allowed the emergence of a new class of financial facilitator, the payment service provider. In essence, these operations complete “Two of the greatest challenges faced functionality such as storing a cash when they display the Checkout logo, offer additional services such as a team the link between the two participants in making payments overseas are the balance in the consumer’s account, and also that the system’s simplicity of experts on preventing gaming fraud, in an online transaction by taking complexity of payment formats and the Google Checkout is focused on single means customers already signed up and again a global mindset is on dis- payment from the buyer and passing it ability to track the status of transactions transactions. Users save their card to Checkout are 40 per cent more play – the company provides users with on to the seller, in a way that’s as hassle- from initiation to beneficiary. Payment details and personal information in likely to be converted to a sale than live chat support in 22 languages. free and secure as possible for both. service providers need to offer solutions their Google account, then only have non-Checkout users. And the list goes on: Wirecard, Mon- For the seller, they remove the that address both issues,” says Colin Kerr, to enter a password to pay for their PayPal and Google may be the best- eybookers, 2Checkout, Digital River’s headache of developing and managing industry manager for payments and purchases with Checkout. known brands, however, many less CCNow, Gogopay, Russia’s Webmoney, in-house systems that would have to core banking at Microsoft Worldwide high-profile payment service providers PayPoint – perhaps more familiar from handle multiple payment methods and Financial Services. siMple ...or coMplex? find their strengths in more specialist its logo in the window of your local foreign currencies; for the buyer, they Probably the best known to consumers From the seller’s point of view, services. Envoy Services, for example, newsagent, where the service also allows make it easy to complete a transaction is PayPal, an early entrant into Internet Checkout, like many other payment emphasises its international creden- people to pay utility and mobile-phone payments – it was founded during the services, can be simple or complex to tials by supporting 15 local languages bills – and ClickandBuy, with its envi- “ first flush of Webmania in 1998. PayPal implement, depending largely on the as well as 20 local payment options, able list of blue-chip customers includ- Accepting has been relentlessly pushed by eBay, which acquired the service in 2002, as extent to which you want the payment process to be integrated with your including POLi (Australia & New Zea- land), Abaqoos (Hungary) and Telen- ing Electronic Arts, iTunes and Playboy. (Inevitably, the Internet being what it is, an order online the payment method of choice for the millions of online auctions it hosts, and other systems and your own branding. At the most basic level, appropriate to gresso (Spain). By contrast, Google Checkout accepts only a handful of there is also an extreme libertarian end of the market, with nascent projects like is one thing; that in turn has given it a household- name familiarity unrivalled by any the smallest online operations, ready- to-use HTML code supplied by Google internationally well known cards. Envoy Systems allows companies to eCache and Ripple attempting to create digital money and transaction systems sending money other payment service provider. can be pasted into a firm’s own Web pages; more sophisticated e-businesses receive money by local wire transfer, without having their own bank ac- untainted by big business.) in a way that’s one-off creDit PayPal continues to develop – most may find that their shopping-cart technology already incorporates count in those territories and transfer funds to 192 countries, through their paYMents pie All these and others are competing for secure, reliable recently, for example, with the introduction of Pay Later, a service support for Checkout (about a dozen do), or develop a bespoke interface to 150 local bank accounts, supporting over 22 currencies. This offering is a slice of the payments pie, which can only grow as e-business itself grows and cost-effective through which consumers can obtain one-off credit to fund their online make other shopping carts work with the payment system. enabled by a range of real-time bank- transfer services, which last year saw – earlier this year, payment service provider SagePay was reporting year- for both parties is purchases. And over the years it has seen off plenty of competitors, including Unsurprisingly, Google has ambitions for Checkout that go beyond merely 25 million cross border payments exe- cuted, totalling in excess of $1 billion. on-year growth in transaction volumes of more than 50 per cent every month, a good deal more Billpoint – its predecessor in the eBay providing an enabling technology. Others go beyond payment services to and nearly 70 per cent in some. ” stable – as well as Western Union- Already firmly in control of the first part support the rest of the transaction. Kagi, Many will succeed, and some won’t. complex founded BidPay and the PayDirect service operated for Yahoo! by HSBC. of many online shopping expeditions – the user’s search, and the merchant’s for instance, can provide technology to manage the downloading of paid-for The big players – the banks, PayPal, Google and a handful of others – will However, despite its high profile, advertising – it now wants to be present digital content or the online registra- not go away, but there is scope for quickly and confidently, even if their PayPal is far from the only choice at the completion of the transaction too, tion of software purchases, and for mer- niche providers to flourish too when existence is minimised beneath the for businesses looking to complete and hopes that it can deploy its existing chants selling physical goods, it offers they add value to the buyer-seller re- seller’s own branding. They’re not transactions online. large base of registered users and its warehousing and fulfilment services. lationship. Large or small, global or dissimilar to the merchant service Among the most significant advertising platform to enhance the Similarly, Dragonfish specialises local, selling boxes or selling bytes, providers that process businesses’ alternatives, because of its hugely performance of its payment system. in providing payment services to the each business has distinct require- credit-card transactions, but frequently powerful owner, is Google Checkout, The company claims that Checkout online gaming sector, although it is ments when it comes to outsourcing offer a wider range of payment options which has been available in the UK users are ten per cent more likely to now expanding into retail too, accord- e-payments – and a provider that and – crucially – have a resolutely for about two-and-a-half years. Unlike click on AdWords – the ads displayed ing to marketing director Gavin Bisdee. meets those needs should soon make international outlook. PayPal, which offers some bank-like on its search-engine results pages – This sector-specific focus allows it to its presence felt on the bottom line.
  • 5. E-MONEY 2010 5 PROMOTIONAL FEATURE Think global, pay local Envoy Services has developed a network of 150 local bank accounts and payment services worldwide. Businesses that are expanding their operations globally need to realise that a one-size fits all business strategy won’t cut it in a competitive environment T he Internet has been break- no need to enter payment details for ing down barriers between every online transaction; payments different geographic markets are quicker as it eliminates the need to for some time. However, lo- register on websites and, unlike credit cal customs, traditions and general or debit cards, there are no surcharge approaches to business still vary from fees for the consumer. country to country, and one of the For merchants, iDEAL also has a most important of these is the way number of advantages: acceptance fees in which customers prefer to pay for are considerably lower than those as- goods and services over the internet. sociated with credit cards, they receive Businesses that are expanding their immediate payment confirmation and operations globally need to realise that they can leverage lower acceptance fees a one-size fits all business strategy will to offer discounts to consumers. not work in a competitive environment. Another example is Przelewy 24, a Consumers and businesses alike will bank supported service in Poland, choose to engage with the organisa- which is independently owned by tions whom they perceive to have the DialCom24. Established in 2003, best understanding of them and how Przelewy 24 is now supported by they want to operate. approximately 7000 merchants and Consider this: a UK company promotes a staggering 95 per cent which is successfully operating in banking coverage in Poland. the UK by solely accepting payment Not only do the experiences of by cards will, if it takes the same ap- countries such as Germany, Po- proach in Germany, potentially miss land and the Netherlands demon- out on sales to over 70 per cent of strate that real-time payments are domestic consumers who will not or a proven and successful real-world cannot use payment cards. Likewise, if possibility, but they also illustrate the company cannot accommodate the the contrast in payment attitudes iDEAL payment network in the Nether- within the UK: one payment solution lands or Przelewy 24 in Poland, they risk does not fit all. missing out on transactions from up to 80 per cent and 95 per cent of the popu- easier for businesses lation.Without adopting the preferred For an individual retailer or service pro- payment types within each country, vider, just to be able to offer each of organisations risk missing out on huge these real- time payment options, even proportions of business. There is no ex- without trying to replicate Envoy’s large cuse. Thanks to organisations such as network of international bank accounts, Envoy Services - a UK based payment would be both extremely costly and ad- technology and services provider - it is doubt that pay- ments such as ministratively hugely complex. now easier for businesses to trade in the ment cards and Giropay, Sofor- Envoy has enabled over 300 me- region of their choice, offering popular online banking have tuberweisung, ELV, dium to large merchants through a local payment services, without having transformed how money payment on invoice and single integration to access a variety to create a complex, costly infrastructure transactions can be made. cash on delivery are popular. of payment methods, and make both within each country to do so. Gone are the days of having to carry In the Netherlands, the domi- significant savings in time and trans- vast sums of cash around or relying on nant payment method iDEAL has action costs. Last financial year, Envoy tHe rise of real-tiMe the postal service to deliver a cheque to seen real-time payments rocket since processed over 2.5 million cross-bor- paYMents the right person at the right time. local paYMents its launch in 2005, with 28 million der transactions, in 192 countries, rep- The key to developing a global, but lo- However, just as payment cards sig- Envoy does this by operating local bank transfers processed in 2008. In just resenting a total transaction value in calised, strategy revolves around three nalled the death knell for established pay- accounts ‘in country’ which are directly four years, iDEAL has become re- excess of $1 billion. Significant growth key tenets. Offering tailored products ment mechanisms such as the humble integrated with banks’ proprietary soft- sponsible for between 60-80 per cent is forecasted this financial year. that meet the needs within each spe- chequebook, we are entering a new era of ware. This means that organisations of all online commerce in that mar- In summary, it’s the informed com- cific country, conducting business in payment technology, which offers a host can make and receive local payments ket, depending on the information panies who use these technological the right language for the region, and of benefits for businesses and consumers through the Envoy interface at a fraction source, demonstrating the strong advances to their advantage who will offering payment services that cus- alike – real-time payments. of the cost and time of using their own demand from Dutch consumers for be in the best position to reap the tomers know, use and trust. Real-time bank transfer services are bank’s international payment service such a service. benefits of being perceived as a ‘local’ This last point relating to payment specifically designed to complement which is often expensive and slow. iDEAL offers consumers a more supplier –regardless of where they are services may seem obvious, but too domestic card services to maximise ac- Envoy clients, who include Datacash secure means of paying as there is located in the world. many businesses decide how they cess to domestic customers –particularly plc, one of the UK’s largest payment will accept payment for goods and those who prefer not to use cards online. processors, and Viagogo, the ticketing services as an afterthought. Instead, In most cases, these services offer instant exchange, typically save between £10- this should be one of the first issues a secure online bank transfers between £15 per cross-border transaction. business should consider. After all, if business and business, or business and Despite the clear benefits of real- people cannot make payments using customer. One such real-time payment time payments, it is not yet the method their preferred method, then there is provider is Envoy Services whose network of choice in the UK where payment a high risk that they will look else- of bank accounts and payment services is cards still account for the majority of where and the transaction will not used to collect and deliver money eco- the market. Elsewhere in Europe, it is happen in the first place. nomically, quickly and securely on behalf a very different story. A recent For- Technological developments have of customers and online retailers world- rester report found that payment card meant that there are many different op- wide. Envoy offers merchants single point adoption in Germany is typically low, tions when it comes to paying for goods access to this ever expanding network of while traditional methods such as bank and services. For instance, there is no local payment services. transfers, bank specific payment instru- www.envoyservices.com
  • 6. 6 E-MONEY 2010 “ Retailers that succeed are those that listen to their customers, give them what they want and execute with ” excellence “We are at the sharp end of fashion, as opposed to clothing,” says Robertson. “It will help to grow the online market, which is good. The tide is definitely in our favour.” Increasing the amount customers spend on the web, rather than on the high street, involves removing barriers. Instead of trying on in a shop, customers can get free delivery and return. ASOS can match the instant delivery of a shop with same day delivery for just £9.95 extra. “It becomes so convenient that people won’t get in the car,” says Robertson. His second biggest peak in the day is lunchtime, but the 9.00pm peak is twice that size, when the shops are shut. nick robertson predicts big growth in the online fashion market He points out that a web platform provides an infrastructure that can no guts, no glory! boundaries and no physical walls, service global distribution. which lets you carry product ranges Before investing in any local that are vast relative to a high street marketing or language facilities, store. In a physical world it is all about the site is shipping from the United return per square foot. The biggest Kingdom to 114 different countries high street store has 200 dresses on its around the world, with the biggest E-commerce success of money, lose it and go under,” he Aimed primarily at 16-34 year olds, it web site, we have nearly 3,000. If we being Denmark, France, Germany, says. “We were propped up by our offers 25,000 branded and own label are out of stock on one item customers Ireland, Sweden and United States. comes from a sound other business and only raised £2.8 product lines over 1,500 new ones are will select another.” International sales already account for business model, the million from family and friends, so introduced each week. It attracts over By definition, fashion is notoriously 25 per cent of sales are growing at 110 we didn’t have anything to go under 5.2 million unique visitors a month. volatile and big name brand perform- per cent a year. founder of ASOS.com with. We just paddled away furiously With a background in marketing ance can quickly go from phenom- Robertson sees the big advantages tells rod newing until the revenue and cost lines and limited funds, ASOS was able to enal to catastrophic. However, ASOS of the internet over the high street as crossed in 2003.” be very frugal and sensible in the way is hedged by spreading its risk across being more inventory, lower overhead A ASOS plc started as a marketing it attracted its first customers, relying 800 brands, as well as its own label. and global selling. SOS.com was born on business that did product placement on ‘free’ marketing, like online search The United Kingdom clothes He is exploiting these benefits the internet in June with celebrities. The name was and press campaigns. Every day sales market is worth about £45 billion through an organic ‘build and grow’ 2000, shortly after the derived from ‘As Seen On Screen’, and were bigger than the previous day, annually. Between five and six per strategy. Whilst mobile shopping is internet bubble burst, the original web site told people what every week bigger than the previous cent is currently over the internet not material at the moment, he sees it when the business landscape was brands celebrities were wearing in week and every month bigger than the and Robertson expects this to rise as the next big opportunity. covered in dead and dying web sites. programmes and films. Robertson’s previous month. The trend improved to 10-15 per cent over the next “Retailers that succeed are those “No guts no glory!” That is the way vision was to increase revenue by quickly as more fashion products were three or four years. With reasonably that listen to their customers, give Nick Robertson, its chief executive selling the product as well. added to the site. healthy margins in fashion and them what they want and execute with and co-founder, philosophically Admitted to alternative investment “Fashion is all about newness, without the overheads of shops and excellence,” he concludes. “We have set describes the timing. market in October 2001, ASOS is the discovery and what is different,” staff it can be quite profitable. This out our stall to do that, so we stand “The classic internet business United Kingdom’s largest independent says Robertson, “and the internet is bringing in world-class retailers a good chance of winning the online model at the time was to raise lots online fashion and beauty retailer. enables that in spades. There are no like Tesco and John Lewis. fashion race.”
  • 7. E-MONEY 2010 7 risk vs opportunity: PROMOTIONAL FEATURE The business imperative cost of fraud for legal-specific e-billing software Educating consumers is essential for successful Legal departments have unique needs for reviewing e-commerce security, and processing law firm invoices and DataCert AIMS says rod newing provides legal-specific e-billing to meet those needs F B raud always goes to the arclays Bank is one of a growing AIMS, each invoice goes through weakest point. The payments number of organisations in the an advanced automated validation industry introduced chip UK that are taking the lead on process. We can now be sure each and PIN in the ‘card present’ implementing electronic billing invoice is compliant with our Outside physical world, which drove fraud specifically for their legal team. Counsel Guidelines.” to the ‘card not present’ world of The British bank, which employs over The data captured through AIMS internet, mail and telephone order- 150,000 people worldwide, has imple- now gives Barclays an unprecedented ing. Verified by Visa and MasterCard mented DataCert AIMS to track its legal view into the details of its legal spend, SecureCode, using their agreed 3-D spend more closely and automatically including which matter, with which law Secure standard, were introduced validate fees and expenses. firm, at what cost, and most importantly, to authenticate internet purchasers. As well as allowing Barclays to track for what outcome. Financial Fraud Action UK, the pay- more closely where invoices are in the The Barclays experience is typical of ments industry voice on fraud, has review process, they are keen to work the increasing interest DataCert sees just reported an 18 per cent fall in in partnership with their law firms to in its AIMS solution. “All of the legal ‘card not present’ fraud, but an in- understand in more detail the types of departments we speak to in the UK and crease of 55 per cent in online bank- work that have been carried out and to Europe in general, whatever their size, ing fraud, as criminals move on to improve the management information realise that they have to improve the way the next weak point. that is made available. they currently handle, receive, review, Although a fall in fraud might seem To achieve these goals, Barclays track, and report on their legal spend,” positive all round, web merchants understood that a legal-specific e-billing said Jerome Raguin, DataCert’s Territory carefully monitor conversion rates system was needed. While horizontal manager for the UK & Ireland. from entering check out to making billing systems can satisfy many of Working with DataCert on Barclays’ the final payment. Some have been the general billing requirements of an legal e-billing initiative has been naturally disturbed by perceived lost visa codeSure aims to be the consumer’s preferred payment method organisation, they are insufficient for critical to its success as DataCert is sales, fearing that additional security the more complex billing needs of the the only vendor in its market that can is putting buyers off. spent. It attributes the reduction in merchants to replace the current pop- legal function for which the invoices truly support the unique and complex “3-D Secure lacked the huge internet fraud to both growth in the up verification screen with a simpler are very content-rich, require many e-billing requirements defined in media campaign of chip and PIN use of the new authentication process one that appears to be part of the validations and complex and variable the European Union VAT Directive. to educate consumers,” says Simon and the increasing use of sophisticated payment process. It is also piloting review/approval workflow, and contain DataCert provides a comprehensive Black, managing director of Sage Pay, fraud screening detection tools by CodeSure in six different countries. a great deal of line item detail – each solution that helps its customers achieve a payment services provider. “It has retailers and banks. This is a standard Visa chip card relevant and critical. compliance with all aspects of the EU also lacked strict enforcement. 3-D In Europe 450 banks are employing with a 12 digit keypad and eight Barclays understands first-hand VAT regulations, including an e-invoice’s Secure needs a password, which is an Verified by Visa and have enrolled 50 digit display screen on the back. the benefits of using DataCert’s legal- content, transmission, and storage. extra step some users don’t want to million cardholders, mostly in the When users enter their PIN on the specific e-billing system to capture line In addition, DataCert has an take, but is necessary to fight fraud.” United Kingdom. Over 50 per cent of card it displays a random one-time item detail and ensure compliance with established team of full-time staff in “ Jennifer Perry, founder of number, which is entered into the its established guidelines. “Traditional key European markets, delivering local E-Victims, which provides support Verified by Visa payment process on billing software just did not give us implementation, dedicated support, to victims of electronic crime, says Consumers do the computer or given to a merchant enough visibility into the details of and relationship management services that the banks and retailers protect over the telephone. Visa expects rapid each transaction,” said Mark Harding, to its customers and their outside the trustworthiness of their brand, not understand deployment early in 2010. general counsel at Barclays. “With counsel firms. so don’t want to raise security issues “We are all drowning with different themselves. “They put authentication why they are static passwords and passcodes for processes in place to protect themselves as much as to protect being asked to different web sites, applications and payments,” says Smith. “There is a the consumer,” she says. “However, consumers do not understand participate in yet really strong need now to move to dynamic passwords and passcodes, so why they are being asked to participate another layer of consumers don’t have to remember ” in yet another layer of security and them all. Visa CodeSure will not are annoyed.” She explains that when criminals security just bring the added security of chip and PIN to online payments and get hold of your e-mail address they internet banking, but will make it so will try to hack your password. If all Visa card e-commerce transactions much more convenient and intuitive they succeed, they will try the same are now authenticated by the Verified for consumers, so it becomes their password on your e-Bay account, by Visa service. preferred way of paying.” then your PayPal account, where they “We would like it to be a lot higher, The latest Unisys Security Index can see your bank and credit card but draconian enforcement rules are found that over 60 per cent of details. “Once you tell consumers this not in anybody’s best interests,” says consumers are still apprehensive is how the criminal works,” she says, Kevin Smith, senior vice president for about shopping and banking online. “they suddenly understand why they fraud management at Visa Europe. The most practical advice comes from need to protect themselves.” “We deliberately set out to create security expert Robert Schifreen: “The According to Financial Fraud the right economic framework, so best way to ensure that customers Action UK, 31.6 million people use that individual banks and merchants don’t abandon the purchase is to the internet for shopping accounting would deploy at their own speed, ensure that your prices are the for 7 per cent of all card payments. hopefully as quickly as possible.” cheapest. Then customers know that However, fraud still only represents Visa is working with UK banks, giving up and ordering from another a tenth of a penny for every pound payment service providers and site will cost them money.”
  • 8. 8 E-MONEY 2010 The hard road to electronic invoicing The European economy could save money, time, effort – and a whole load of paper – if it moved to electronic invoicing. ron condon charts progress so far I magine you are a small company directly into the buyers’ own accounting standards across Europe. “Every cleaning windows for a large com- systems? It would save time, money, member state implemented their pany. Each month you print out an effort and an awful lot of paper. The own slightly different version of it. invoice, send it to their accounts chances of suppliers being paid on time It was not prescriptive enough and department, and then hope you’ll be would greatly improve too! that made things more complicated.” paid within 30 days. The European Commission has says Ifor Williams, sales director If payment fails to arrive, then you already identified this as a major of Accountis, a major player in the have to get on the phone, locate the problem for business. As part of its e-invoicing world. right person to deal with, ask them to goal to reduce administrative costs It is also worth mentioning that locate the invoice and let you know for SMEs by 25 per cent by 2012, the as recently as 2004, some European what is happening. If the invoice has Commission has identified electronic countries still actually demanded that been lost or misplaced, you may end invoicing (e-invoicing) as a major invoices should be on paper, although up having to send a replacement with component of its efficiency drive. that particular barrier has now been re- more delays and uncertainty. A task force looking at the subject moved. Differences still persist, howev- Way to go: e-invoicing Apart from the sheer hassle of reported in July 2007 that “electronic er. For instance, in Germany, electronic is the future having to chase payment, that kind of invoicing could significantly reduce invoices are required to have a digital delay can make the difference between supply chain costs by 243 billion EUR signature, which many commentators survival and failure for many small across Europe, as well as helping to see as over-elaborate and a barrier to environment, because they are used level by the European Expert Group businesses, especially with credit from streamline business processes and wider adoption of the technology. to presenting paper documents to the on e-Invoicing, which will deliver its the banks being so tight. help drive innovation.” It also warned Differing VAT regimes have also VAT auditors. There is a requirement final report and recommendations in Yet it is estimated that around 30 against a fragmented approach been seen as a potential barrier, to retain invoices for six years, so there November for implementation early billion – yes, 30 billion – paper invoices between different countries that could certainly to cross-border invoicing, are concerns over compliance.” next year. are generated across Europe every limit easy communication across according to Stefan Foryszewski, head However, he admits that most The group’s chairman, Bo Harald, year, each of them making their own national boundaries. of business development for OB10, a tax regimes are now becoming plays down the importance of standards slow journey through the mail service, provider of e-invoicing services. “The more enthusiastic about promoting as a barrier to progress. “The lack of before navigating an often uncertain unsuccessful atteMpt invoice is a VAT document, and as such electronic working and that HMRC standards is not the show-stopper. We path from the company mailroom to In some respects that horse had already it is subject to all sorts of legislation, has done a particularly good job in need to change the mindset so that the accounts payable department. bolted, following an unsuccessful which varies across Europe,” he says. enabling it to happen. people see these wasteful practices have How much more efficient would it be attempt in 2004 to promote the “Buyers and suppliers often have Those and other impediments are to disappear,” he says. “We need to get to send all those invoices electronically, use of e-invoicing by harmonising concerns over moving to an electronic being ironed out at a pan-European SMEs, and maybe the bankers, to see the aviva driveS ouT PaPer From the start of this year, the was not a reliable audit trail to ways of improving the system, and If suppliers have their own Aviva and its suppliers. The cost insurance company Aviva has keep track of the physical invoice. examined a variety of solutions, accounting software, they of the overall invoice process, introduced electronic invoicing Incoming mail, unless addressed including automatic scanning of can submit their invoices he says, has been halved, and for its suppliers, and already has specifically to accounts payable, the incoming invoices. electronically directly to the the staff in accounts payable are 65 per cent of them enrolled on could often take some days to Finally, it selected the OB10 service. now able to concentrate of more the system. reach the right department. electronic invoicing service from Smaller suppliers can log on valuable tasks. Before this project began, Aviva Furthermore, Aviva’s suppliers OB10 which operates as a central to OB10 via the Internet and “Beforehand, staff were just employed a team of 10 full-time had no way of knowing when hub where suppliers can send complete a web-based form to manually entering invoices into staff to process paper invoices they would be paid, or even if electronic invoice files in the submit their invoices. the system. Now they can focus and to input the information into their paper invoices had been format of their choice, and which Tom Boosey, accounts payable on building relationships with the company’s Oracle accounts received. then converts all those files into service development manager the suppliers, looking after their system. Not only was the process Around 18 months ago, the the correct format required by at Aviva, says the service has accounts and making sure they very labour-intensive, but there company started researching the buyer organisation. already created benefits for both get paid on time,” he says. tieto.com Financial Value Chain One connection to all your trading partners
  • 9. E-MONEY 2010 9 The bigger prize Companies build their success on efficient supply chains, and e-invoicing has an important role to play in keeping suppliers afloat. But as ron condon discovers, technology can only deliver part of the answer I f electronic invoicing really does take off in Europe, then the benefits for the European economy could go well beyond the saving of postage stamps and envelopes. Seen in the wider context of an improved supply chain, then the greater efficiencies will be a boon to all sectors – both public and private sector, and in all sizes of organisation, from the large to the one-man band. SMEs especially stand to benefit hugely by being paid on time and being able to predict their income. As The paper invoice has no future the payments body BACS reported in September, more than one million small technology alone is not going to make purse-strings in the finance department, and medium-sized British businesses it happen; attitudes and business proc- the people with supply chain knowledge are suffering from late payments, and esses have to be transformed to support in the purchasing department and the collectively they are owed £30.4 billion. new ways of working. suppliers in the external supply chain.” The figure in 2007 was £18.6 billion. One man who has given this a great To achieve all that potential, however, value of e-invoicing. “It’s not just saving there are new companies setting a dead- While the average sum owed to deal of thought is Adrian Done, a pro- the human element – ‘the team’ - has a the price of a stamp and envelope. It line for stopping paper and unstructured individual SMEs at any one time has fessor at the IESE Business School in big role to play in moderating the in- is more about being able to automate invoices. The only danger is that we’ll get fallen in the past year from £38,000 in Barcelona. He spent many years in formation that the systems produce. accounting, invoice financing (which is a plethora of different practices.” 2008 to £28,000 in 2009, the number the automotive industry working on Professor Done says it’s well known in easy to do once you have the invoices in To avoid everyone going their own of SMEs reporting that they are streamlining supply chains and he is supply chain management that technol- a structured form) and then to connect way, the European Expert Group experiencing payment delays rose by naturally suspicious of new buzzwords ogy, if unchecked, can trigger sharp re- it to real-time cashflow services.” will recommend the Cross Industry just over 65per cent, up from 684,000 in – such as e-invoicing – that purport to actions (known as the bullwhip effect), He is, however, optimistic and says Invoice standard developed by the 2008 to 1,085,000 in 2009. offer a simple solution to long-standing which can result in overstocking or oth- the trend towards e-invoicing is already UN committee CEFACT. Reasons for delays included cashflow problems. “E-invoicing can have great er unwanted results. Another example is being forced by large organisations “This is a very rich and very good problems, simply forgetting to pay, and benefits if it’s well implemented,” he computer-driven financial systems that mandating electronic e-invoices as standard that we will start to imple- that old chestnut, “the cheque’s in the says, “but technology is never a magic can generate similarly extreme move- a condition of trading. He cites two ment with guidelines this autumn,” post.” The problem is also cumulative: wand, it is just part of the toolbox.” ments in markets. examples from his native Finland – Harald says. “It will take a while to be- companies that are paid late will be For him good supply chain manage- “There are dangers of relying too the City of Helsinki and United Paper come the sole standard across Europe, unable to pay their own suppliers, so ment comes down to one word – team- heavily on technology,” he says. “There Mills – which have recently stopped but I hope that it will swiftly become the the situation inevitably descends into a work – but he sees far too little teamwork are not any automatic systems on this accepting paper invoices. network standard. So if you have invoic- damaging cycle. BACS’ research found happening in business. In July this year, planet that can be switched on and left es coming in from 27 members states, that 52 per cent of SMEs said that if he published the findings of a study he to run. The human element has to be Huge savings they might originate in their national they were paid late, they would pay their carried out with 550 chief financial of- there. You need judgement and wisdom Elsewhere, the Danish Government has standard, but arrive in a single format.” invoices later too. ficers from around the world. to moderate the systems.” taken a lead and already reaped huge He is convinced that Europe has no The vicious cycle has to be broken at This revealed that only 46 per cent As he says, in this globalised world, savings. Increasingly large corporations choice but to drive out unnecessary the top of the chain, by large organisa- of CFOs believed their own internal fi- it is supply chains not companies that are insisting on receiving electronic administrative tasks and inefficiency in tions taking control of their systems and nance and purchasing departments were compete against each other. “In pretty invoices in a structured format, so order to stay competitive in the world. making sure their immediate suppliers properly integrated. “What level of inte- much any sector, there is a flow of that the information they contain As he says, Europe is forecast to be are treated fairly. E-invoicing is a crucial gration can organisations hope to have goods, services, information, data and can be fed directly into the buyer’s short of workers over the next decade. element in making that happen. with external companies when their in- money. It is all about flows upstream own accounting systems without any “By 2020, there will be 35 million fewer The banks also have a vital role to play. ternal integration is so poor and there and downstream. further re-keying. people of working age in Europe and Not only is their role pivotal in helping is so little communication and empathy To achieve good teamwork, you need “Paper invoices have no future in Eu- 25 million more pensioners. to make e-invoicing available to smaller between the departments?” he asks. good communication. That means the rope and this also includes electronic If we don’t eliminate administra- companies, but also in helping to inte- “That is a where a system such as e- members have to work together and invoices submitted in Word or PDF be- tive tasks on a large scale, there will grate the various elements of the supply invoicing is potentially very powerful collaborate.” If his research is to be be- cause they are not produced in a struc- not be a way to finance our welfare chain, possibly from the purchase order – it has the potential to facilitate com- lieved, we have some way to go before tured format,” says Bo Harald. “Every day systems,” he warns. through to factoring and payment. But munication between the holders of the reaching that level of integration. e-Invoicing: Fast. Secure. Guaranteed. Discover how e-Invoicing can improve efficiency and reduce costs. Call OB10, the global e-Invoicing network, on 0870 656 5214 or visit OB10.com
  • 10. 10 E-MONEY 2010 a challenge for the banks Electronic invoicing could provide the banks with some much needed extra revenue. ron condon asks why so few of them have yet to spot the opportunity F or many observers, it seems odd that while electronic pay- ments have become common- place for business of all sizes, the banks have failed to take a more proactive role in facilitating other as- pects of the trading cycle. Ifan Williams, sales director of the e-invoicing services company Accountis, speaks for many when he says: “Nearly all payment activity is done electronically, but there has been little progress so far by the banks in being able to handle the other business transaction types as well.” © Rex Features However, there are small areas of activity and a few banks have begun to spot what could be a highly lucrative business proposition. For instance, Small suppliers can log on to rBS and complete a web-based form with invoice details and this will go straight to the purchaser’s system Accountis provides the e-invoicing service which RBS now offers to its Small suppliers without accounting keying of information, which can intro- says most banks have been slow to spot RBS is doing something similar that own customers. software of their own can just log on duce errors and inaccuracies. Both sides the potential. “The recent problems in will allow small suppliers to offer and to the RBS system and complete a web- benefit: buyers can automate the receipt banking have dampened the desire to dictate the delivery of e-invoices - effec- “ based form with all the details of the and processing of an invoice, while the invest, but I see that changing in the tively a trimmed down self service ver- Customers invoice. Then the details go straight to the purchaser’s system. suppliers can be sure the invoice has ar- rived and is in the system. next 18 months,” he says. “A lot of banks have online portals. sion of its current e-invoice offering. “There is a big business opportunity are rightly “We’re not trying to change the way people work. We are faithfully trying So why have so few banks chosen to get involved? It would make sense if that portal could be extended to create or even for the banks,” says Ifan Williams. “In these times, they are focusing on their nervous about to reproduce what happens in paper today, but online,” says Watkinson. “If RBS’s Ian Watkinson says that customers are worried about data receive online invoices. The banks have access to millions of SMEs and we have basic transactional services. What they once saw as boring is now seen as a very the reliability you are too prescriptive, suppliers just say it’s too hard.” security. “Customers are rightly nervous about the reliability and access to a large number of buying organisations. It would be appealing for stable revenue generator. Williams suggests that the banks and integrity for suppliers, it’s free integrity of electronic invoices data, which is why we decided to use us to work with the banks. Together we could ease the transition to electronic could assist in the handling of other documents around the actual payment of electronic The aim, he says, is to help big digital certificates throughout. They invoicing.” such as the purchase order and the in- ” buyers get their invoices into their allow you to ensure the authenticity Some Scandinavian banks already voice. “That would give them additional invoices data accounting systems with ease. RBS charges buyers for use of the service of the data, and we can check that the invoice data has not changed offer such a service. They have added transactional revenue, and it would also an invoicing section to their online then allow them to do additional things, based on the number of transactions, in transit between the supplier and banking portal, allowing their small such as loans – supply finance, invoice Ian Watkinson, head of product but for the suppliers it is free. buyer via the internet.” business customers to create invoices factoring.” It seems very low risk too – innovation at RBS, says the idea of the By tying in the electronic invoices with But Stefan Foryszewski, head of online and send them off, just as they loaning money to the business based on e-invoicing service is to make electronic the buyers’ own accounting systems, it business development for OB10, which would make an online payment to the assets they are transferring.” operation feasible even for small eliminates the need for any manual re- works closely with Santander Bank, another bank account. companies. Large companies have coMplex lanDscape long used Electronic Data Interchange He admits that the compliance land- (EDI) systems to communicate orders, scape in Europe is complex and has invoices and remittance advices, he says, but those facilities have been reverSe facTorinG muddied the waters somewhat, but points out that progress is being made. beyond the reach of smaller firms. For instance, the Euro Banking Associa- “Previous attempts to improve elec- One big advantage of streamlining the whole funding, for a fee. All parties can benefit form the tion is currently defining an inter-bank tronic document exchange have worked invoice process is that buyers can, if they wish, either arrangement. The suppliers are paid early, albeit at standard to allow electronic invoices to well between a large buyer and a large guarantee to pay on time, or even negotiate a discount a discount. The buyers pay a credit fee to the bank, be exchanged between different banks supplier where there are large volumes, for early payment. That may be very attractive for but that may be more than offset by the discount in different countries. By the end of however this hasn’t really worked for the small supplier - it saves the buyer money, and it they have received. The buyer also benefits by being 2009, they will publish what the service smaller organisations,” he says. also presents the bank handling the e-invoices with able to send a payment to one lender rather than should be and next year they will refine The RBS service aims to cater for a further opportunity to provide additional financial many small suppliers. the requirement to the point where suppliers of all levels. If they have services, such as reverse factoring. As well as receiving fee income, the banks are able they can issue a tender for the provi- an accounting system of their own, In this process, the bank undertakes payment of to develop relationships with small firms without taking sion of an inter-bank service. suppliers can download a small piece of suppliers at an agreed date, but may wait longer to on additional risk, because they are in effect lending “Banks are already connected for software, which intercepts any invoices collect the money from the buyer. to the big reliable company rather than to a lot of payments clearing. The proposal now they try to print for a buyer. That file This may then allow the buyer to negotiate a SMEs. It may also provide cross-selling opportunities is to connect them for the exchange of is then sent electronically to the RBS discount from the supplier in exchange for earlier and allow the bank to build a credit history on the electronic invoices,” he says. “It is still system, and formatted ready to be sent payment, with the bank providing the interim small firm that may allow additional lending. early stages but at least the banks are on to the buyer’s accounting system. beginning to think about it.”
  • 11. E-MONEY 2010 11 euro industries to benefit from payments system The introduction of the Single European Payments Area, will ultimately mean that businesses across the EU, will be able to treat euro to euro payments across the continent as if they are domestic, writes andrew Gellatly A variety of industry sectors by embracing SEPA as soon as possible non-urgent payments, with the aim for stand to benefit from the says Peters. There is a commitment from a new SEPA direct debit system to be SePa is a single payment market for transactions in euros opening up of European Europe to SEPA so it will happen.” up-and-running by 2010 with a longer payment systems that will The aim of the scheme, which has term aspiration to replace existing countries as being at the forefront of of the year onwards, there is the next accompany them, but implementation been developed by the European Central national schemes. the changing system. “I would say of development, which will be collecting has proved far from smooth. A survey of Bank and European Commission This cycle will be accelerated further all the industries, gaming – and the money through direct debit,” he said. European institutions conducted earlier via the European Payments Council by 2010 in accordance with a new piece financial services that work with them “With SEPA, if they have a euro this year found that around 70 per cent (EPC), is to create a single payment of legislation coming into force called – is one of the quickest to adapt and account in London, they can make of the organisations questioned believed market for transactions in Euros. the Payments Services Directive (PSD). implement these types of changes.” a SEPA payment to those countries that national legislation would not be This will ideally mean consum- There are some wider issues “Many gaming firms work with within SEPA through their euro ac- available until the third quarter of 2009, ers and business making and receiv- surrounding the introduction of third parties and they should be dis- count in London without having a leaving very little time for institutions to ing non-urgent payments across the the system, including the question cussing this with them. They should local bank account in the country of become compliant by the beginning of SEPA area efficiently and cheaply, as of whether it will always be cheaper also be talking to their banks about the beneficiary. next week, 1st November. it is done in individual countries at than using local payment systems, the opportunities and challenges.” “At the moment it works for paying Still, Mark Peters, cash management di- the moment. It should also lead to the start up costs of the scheme However, for gambling firms it customers on a non-urgent basis but rector at Barclays, believes that Single Euro improved economies of scale and re- and the potential dominance of would seem to offer plenty of posi- when the SEPA direct debit system Payments Area (SEPA) payments could duced cost of the payment system as global schemes, particularly with tives. “There are two fundamental is available it means you will be able potentially save up to £10 per non-urgent an open market allows financial insti- card payments, but the rewards can parts that are going to benefit the to collect money from customers transaction for firms, depending on their tutions to compete in countries they be considerable. gaming industry,” said Mr Peters. around Europe without the problems size and discounts for bulk trading. have not previously had access to. Peters singled out gaming firms “There is the sending money to or expense of a local bank account “Firms should be able to save money The SEPA Credit Transfer (SCT) and the third parties they often deal customers part, which is being done in those countries where gambling and improve administration processes service went live in January last year for with to handle cash payments in other now and is live, and then from the end is allowed.”
  • 12. 12 E-MONEY 2010 PROMOTIONAL FEATURE The business case for automating document driven business processes an enterprise approacH sational responsiveness leads in turn to An organisation’s centralised, high to capture additional benefits. Customer service volume capture infrastructure must The benefits brought from automating improves when “waiting for documents” work in tandem with the distributed document intensive business processes can be eliminated from the corporate document capture processes prevalent cannot be overstated. In the US and Eu- mentality. Vendor relations improve in individual departments. For all areas rope alone over 20 million tons of offi ce when payments are no longer delayed to communicate easily, an organisa- paper is produced and consumed every due to missing verifications. Regulatory tion should have a stable, consistent year. The use of paper remains pervasive filings are more timely, payments are architecture. A unified infrastructure across many industries, resulting in high received more quickly, and most impor- ensures that both scan-to-archive and administrative overhead costs and too tantly, businesses can react instantly to scan-to-process capture operations are many points of failure as documents are a changing environment, which offers a able to work harmoniously, feeding routed throughout the organisation. distinct competitive advantage. data into a cohesive business process. A recent research report by Aberdeen Ideally, the capture platform will Group found that 75 per cent of compa- tecHnologY anD process provide the scalability needed to meet nies surveyed employ predominantly pa- in HarMonY the full range of document capture per based processes to manage their ac- Enterprise capture synergy means demands, from individual desktop counts payables (AP) function, taking as improve your business processes and transactions – better speed, extending the value of existing tech- and ad hoc workgroup users all the long as 33 days to process an invoice at a cost, accuracy and efficiency nology. For example, simple ad hoc way up to production level volumes. A cost of £22. Paper based invoice process- scanning capabilities such as scan- single provider should be able to offer ing is labour intensive and subject to ing document capture to the beginning sides communicating more efficiently. By to-email and scan-to-fax features can consistency across all areas. In addi- multiple points of failure – from the time of the business process. The accelerated taking this enterprise approach to cap- greatly enhance current investments tion to offering a consistent platform an invoice is received until it is matched, adoption of desktop scanners and mul- ture, organisations can greatly increase in office automation tools. When built in both the front and back office cap- validated, reconciled and finally paid. Ac- tifunction peripheral devices (MFPs) the return on their existing investments on a common capture platform, each ture operations, the capture platform counts payable staff spend 40 per cent provides an indicator of this changing in both staff and technology. The network department’s favoured communica- should be equally adept at processing of their time researching information to landscape. There is a shift toward trans- infrastructures, which have become an tion tool—email, fax, MFP or desktop the range of documents types coming simply respond to basic supplier inquir- actional capture solutions that enable organisation’s communication backbone, scanner—can be immediately inte- into transactional business processes. ies such as invoice receipt and payment organisations to directly and reliably are that much more effective when paper grated without additional investment. Rather than designating separate status. AP staff also lack sufficient visibil- integrate capture into their document based and electronic information can be Maximising the potential of an in- software products for different docu- ity into their cash management processes driven business processes. seamlessly integrated. Document reposi- tegrated, enterprise wide, document ment types—structured, semi-struc- and cannot maximise financial advan- Document capture has evolved far tories become more than storehouses of capture platform requires consideration tured or unstructured—a single ven- tages from early payment discounts. beyond its root in scanning to ar- archival records when ongoing transac- of how well the existing technologies in- dor that can handle all three provides chives. Document capture systems tions can access and update information teract. As with networking efforts of the consistency in user interface, key fea- DocuMent capture now feed and initiate transactional in real time. As for investments in person- past, a highly customised, proprietary tures and functions. Further, the sys- Moving to MainstreaM and time sensitive business processes, nel, workers enjoy substantial productiv- infrastructure will be more expensive tem should be designed to accept both aDoption enabling document driven business ity gains when paper documents do not to implement and difficult to manage. paper documents (scanned) as well Within these document intensive ap- process automation by: interrupt work, but are simply a connect- Cross-departmental collaboration can as electronic content. With the right plications, early adopters of capture •  ransforming paper based docu- T ed part of any business process. be hampered if the tools don’t play well solution in place, it shouldn’t matter tools have been the individual depart- ments into digital images as soon as Employees are not only able to focus together. With a standards based plat- what form documents arrive in. ments most affected by slow and ex- they enter the organisation; on higher value tasks, but are also more form, many of the compatibility issues pensive manual paper processes. Fre- •  elivering outstanding image qual- D productive in an environment of real that plagued earlier collaboration at- quently each front office department ity for any scanned document; time information sharing. This organi- tempts can be avoided. would discover the benefits of capture •  apturing,classifying,extractingand C independently, with little cross-de- validating any document or form, re- partmental consideration. High volume document capture gardless of format or type; •  utomating the straight-through A Summary systems have also been found in the processing of information into work- back offices where the same docu- flows and business systems; and The Kofax enterprise capture platform offers un- An enterprise capture approach offers the follow- ment functions had previously been •  uditingtheprocessingofalldocu- A matched scalability from centralised to highly dis- ing tangible benefits: performed manually. Many of these ments from point of receipt through tributed environments, from individual desktops n  mmediate cost savings; I forms processing operations process to archiving to enterprise deployments and from basic archival n  educed redundancies; R incoming paper documents in batches scanning to powerful document classification and n  ncreased information accuracy; I using high volume scanners. In its extenDing tHe value separation and data extraction. The company’s mar- n  liminated delays; E early days, capture’s role was almost of existing DocuMent ket leading technology supports a wide variety of n  ecreased repetitive manual handling; D exclusively one of scanning to a man- capture investMents input devices and line of business applications, pro- n  ncreased productivity; I ually indexed archive. Business processes rely equally on both viding a strong enterprise wide platform on which to n  ore secure document control; M Unfortunately, centralised capture front and back office operations. The standardise document driven processes. n  bility to react more quickly to inquiries; and A operations separate data entry from the centralised capture, data crunching, back Information enters organisations in a number of n  aster, more reliable decision making. F very business processes they intend to office operations have proven themselves ways – paper, fax and electronic – so a comprehen- Document intensive business processes are serve. Moreover, when document cap- to be an extremely efficient means of ex- sive capture system must accommodate documents much more efficient in an environment of front ture is only used at the end of a process, tracting information from high volume regardless of their format. When integrating docu- and back office symbiosis. An enterprise approach organisations fail to realise the benefits structured documents. Likewise, capture ments into existing business process workflows, a to capture results in lower costs, better document of integrating data capture with trans- deployed by multiple departments in the scalable capture platform built on an open architec- security, increased productivity, improved custom- actional business processes. The bene- front office has established its value in ture ensures compatibility between existing hardware er relations, simplified regulatory compliance and fits of early capture include eliminating improved customer service and process devices, relational databases, content management faster exception processing. paper as soon as it enters the organisa- efficiency. Semi-structured documents systems and related networking infrastructures. Enterprise capture is a compelling investment tion, reducing points of failure, accel- such as invoices can now be scanned “lo- With a move toward an integrated enterprise ap- that offers a demonstrable ROI that’s relatively erating business processes, improving cally” and the document content reliably proach to document processing, organisations can easy to calculate. customer service and shifting resources and accurately extracted. reap exponential benefits from their capture invest- away from tedious labour intensive The reality of today’s work processes ments, significantly improving the efficiency of doc- for more information on how Kofax can streamline tasks to higher value activities. makes this is a hybrid world. Scanning ument-centric operations and reducing costs while and accelerate your document driven processes Given the clear benefits, progressive need not be a “here or there,” front or back improving process quality. visit www.kofax.com/solutions companies around the world are mov- office operation. The key is to get the two
  • 13. E-MONEY 2010 13 colliding technologies running for a while to test the tech- nology and it works.” a secure environMent is keY Another change on the way it to combine different payment tech- nologies from the same bank onto rod newing discovers that the mobile Two become one: a single card, including debit, credit the digital wallet and prepaid, which can also be con- phone may provide the missing link in the for tomorrow tactless. Handsets can also be used chain for a cashless society to make internet purchases using 3-D Secure for authentication built C into its browser. ash is a costly and inef- telephones, allowing payments to telephone is the Handsets can also be used to bring ficient payment method. be made by touching the handset terminal and has additional security to e-commerce Some years ago Ovum, against a reader. become the device in conjunction with a computer, the analyst, estimated the One of the problems of carrying that will actually get using the higher level of security annual cost to banks, retailers and cash on a plastic card is the need rid of cash.” associated with encrypted mobile customers of handling, counting, to put it into a terminal to dis- Safaricom, the leading calls. Turkcell, a mobile operator in recording, storing and moving it as play the balance or to top it mobile communications the Republic of Turkey, has placed a US$30 billion worldwide. The Boston up with more funds. provider in Kenya, already uses highly secure digital signature appli- Consulting Group estimated £4.5 bil- However, the telephone M-PESA, which exchanges pay- cation in SIM cards. lion per year in the United Kingdom already has a screen and ments by text message. 7.5 million As a registered user logs in on the in- alone. “Cash is out primary target to a keyboard and can people use the system, which is sign- ternet through a computer, a secure displace,” says Ian Barber, a spokes- easily and convenient- ing up 11,000 new customers a day. digitally signed encrypted message man for Visa Europe. ly make and receive Barclays, O2, Transport for London pops up on the handset. The pay- Electronic cash was originally ex- electronic payments. and Visa have successfully trialled 500 ment card PIN can then be entered pected to be carried on plastic chip Payments can even be contactless handsets and an Orange onto the handset to authenticate the cards, but a major trial of the Mon- made between individuals says Dave mobile telephone with a built in Bar- computer purchase in a completely dex system in Swindon failed. How- by touching their handset against Birch, a di- clays MasterCard will soon arrive in integrated manner. ever, electronic cash has proved very a contactless card or another contact- rector of Con- the shops. “Mobile payments are growing successful in the form of prepaid less-enabled handset. sult Hyperion, “We are looking at an evolution,” incredibly fast all round the world,” cards in transportation systems, an electronic payments consultancy. says Barber. “Prepaid is currently sit- says Birch. “Mass transit contactless using contactless technology that evolution not revolution “In order to get rid of cash, you need to ting on a plastic card, but it can sit technology is colliding with mobile allows the payment to be deducted “There is something about the personal have lots more points of acceptance. We on a contactless card or a mobile tel- telephone technology, with amazing just by touching a reader. nature of the mobile telephone, com- thought we had to gets lots of terminals ephone, which is going to be increas- results. We are switching off analogue This technology is now being bined with the physicality of touching, out into lots of different places. How- ingly important as the form factor for television, so isn’t it time to think trialled on the SIM card of mobile which seems to work for consumers,” ever, we now recognise that the mobile payment. Various pilots have been about switching off ‘analogue’ cash?” PROMOTIONAL FEATURE mobile money... the new service paradigm in banking Advances in technology have led to new mobile payment is due and having the ability the more they feel in control of their and payments specialists, commented: to authorise or decline it will be another money and their interactions with it. “So we can expect to see an increas- banking services – total control of your finances, high volume proposition. This explains why internet bankers ing array of mobile banking and pay- 24-hours a day, via your phone But it is the control that mobile tend to be more satisfied than those ments products and services coming banking provides a bank’s customer who telephone a bank; they trust and on stream very quickly. We shall be T which gives it the edge. Customers value the on screen information, their texting money to friends and family he way people think about However, the core driver is the im- are more satisfied with their bank own decision making as to what action and text shopping in 2010. and use money is chang- proved product and service proposi- to take and the ability to see the action “This is in addition to mobile serv- ing fast. It is only 20 years tions for banks and their customers happen in real time, more than the an- ices we already provide such as bal- since first direct brought which mobile capability provides. onymity of a call centre. Mobile bank- ance on demand, transaction updates, us telephone banking, 10 years since There are two aspects of this. Firstly ers feel in even greater control because bill payments, inter account transfers internet banking took off. In 2009, mobiles have unique properties – they of the personal nature of the handset. and sending money abroad”. mobile banking is the fastest grow- are intensely personal, they are always The only real constraint on growth Finally, because of their ubiquity, ing banking channel. with you and always on. is to ensure that the technology is in- mobile banking is for everyone; Why is that? Well of course it is That means they are unique in being credibly simple to use. That means it’s very inclusive. The benefits the enabled by advances in technology. able to alert you to financial events like signing up, setting preferences and us- new services can bring to people But technology is not the driver. In- hitting a credit limit or as a fraud warn- ing in everyday life must be easy. The without bank accounts both in the deed recent research by the Future ing. Clearly an attractive benefit in the answer is to provide choice – enabling UK and in the developing world, in Foundation indicates that consum- present economic climate. This is par- people to use text, browsers or appli- terms of safely making payments ers are increasingly content with and connecting people with their and trust the technology which money, are enormous. banks provide. If it works Mobile, like all the preced- and is useful, they will ing technologies, has been adopt it, particular- thought of as a delivery ly a familiar tech- channel. Actually it is a new nology like text and ticularly so if the alert is ‘smart’, ena- way of improving customer service. increasingly, smart phone apps. bling the customer to take immediate There is of course a financial di- action to resolving the situation – for cation downloads, whatever the mension; digital channels – internet example by transferring money from a choice of network or handset. and mobile – are lower cost than the savings account to avoid an overdraft. Alastair Lukies, chief executive of- telephony which they replace. Similarly, being alerted that a regular ficer of Monitise, the mobile banking
  • 14. E-MONEY 2010 15 Know thy enemy and protect e-money data from fraudsters Steve Gold enquires businesses of all sizes, but the problem The process of protecting data – for smaller businesses is usually a lack and IT systems in general – from what the real threats of staff resources. hackers, fraudsters and criminals is facing online businesses Since the end of September, all online a never-ending process. businesses must comply with PCI DSS Whilst most companies have rules on are on the e-money and rules on the security of their customer what employees can and can’t do with card fraud front payment card data. Companies must private data, there is now an overwhelm- Protcting data from hackers is a never-ending process be able to prove that they have met ing need to enforce those rules. Sophos A or exceeded the levels of security and have just started offering end point se- It thus seems important to lay the to the reasons why those procedures s the TJ Maxx card data best practice procedures that the PCI foundations for a better understand- were in place, there would have been “ leak clearly illustrates, Security Standards Council imposes. ing of why a particular set of secu- a good chance that someone would which affected 130 million cardholders around the coMpliance The red tape rity systems and policies are in place amongst the workforce. have thought about what they were doing and used a more secure car- Western world, payment card data can be hacked from the largest organisations According to a senior technology consultant with Sophos, the IT se- can come out “If you look at the now infamous HMRC CD-ROM loss incident in riage mechanism. “The issue here is that technology is not all-compass- with, presumably, excellent levels of security. curity vendor, a large number of businesses have woken up in recent to bite most firms which the records of 25 million peo- ple claiming child benefits were lost, ing. You can’t protect your data us- ing technology on its own, without But what about businesses setting out in the online mail order world for months to the need to become PCI DSS compliant. Graham Cluley where it hurts – you’ll see that, whilst there were se- curity rules in place, those rules were making life too difficult for the staff to do their jobs,” he said. the first time? How can they hope to argues that “compliance does not on their bottom circumvented by staff just trying to Most companies can’t afford to throw ” protect their card data and stay on the mean safe. There are lots of compa- do their job,” he said. In hindsight, money at the problem of e-money right side of the Data Protection Act and the PCI DSS rules that now affect nies in the news, for all the wrong reasons, who can vouch for this line it seems that the HMRC incident could have been avoided with secu- data protection, as they are running at full stretch in the current economic any business trading online? fact.” He emphasises the importance rity systems in place to stop the staff recession. This applies doubly to most Furthermore, the red tape that lurks of viewing compliance as a stepping curity as part of our stable of IT security from using an insecure method of IT departments in companies who in the business undergrowth can also stone in the great security scheme of systems and software. Cluley says that as transferring the data to the Scottish don’t have any extra budget to spend come out to bite most firms where it things and adds that “one can’t view well as protecting against data losses, the office via a courier mail service. on extra protection. But they need hurts – on their bottom line. Protect- compliance as the be-all and end-all software also enforces the security poli- Cluley proffers the argument that to spend the money, Cluley states, ing e-money data is no easy feat for of your data security procedures.” cies in an organization. if the staff were better educated as otherwise they’ll be in trouble. PROMOTIONAL FEATURE understanding the need a There have been some high-profile card data breaches lately where expansive card data loss was caused. for Pci compliance Here you risk a potentially business-de- stroying fine, as well as your banks refusal to work with you further. There’s also an impact on your brand. Will people trust a brand that doesn’t protect its customer’s data? 72 per Keeping money moving quickly and effectively from a Although recent reports suggest that online card fraud in the UK has declined, possibly as a direct result of regulation and cent of those who shop online are already concerned about doing so… your customer through to you is an essential part of running initiatives such as Verified by Visa, MasterCard SecureCode and PCI DSS, card fraud is still a thriving global industry. Consumers want Q what advice would you give to e-commerce businesses and those accepting e-money payments? any business, but with the convenience of e-money comes convenience and as we move into a Web 3.0 era and a mobile boom the need to protect data is ever-more important. Fraud is a a Working with companies that understand compliance is important, as is looking at how you handle card payments. For example, if a certain responsibility. We moving target and fraudsters will do anything you don’t need to store, transmit or collect card asked Simon Black, managing to get card details so the regulations have to details, then don’t. constantly evolve to keep up. Brands such as Faith Shoes and Bombay director of Sage Pay - the UK’s Duck are taking an intelligent approach to e- leading payment services provider - about Payment Card Q Do most businesses understand or know about compliance? payments by outsourcing them to 3rd party specialists whose core business is card secu- Industry Data Security Standards a Understanding the technical aspects of compliance isn’t easy. Sage Pay did some research with SMEs in April 2009 and 68 per rity and PCI DSS. This enables their customers to shop safely and dramatically reduces the costs associated (PCI DSS) compliance cent of those accepting card payments didn’t with becoming compliant, which for some know who was responsible for fraud committed would otherwise cost over £90,000 annually. on their website. Making it easy to do business My advice is to try to make card security part Q exactly what is pci Dss compliance about? is something we’re passionate about at Sage Pay and our focus for the coming months is of your over-all business strategy. Don’t lose potential customers at the check-out because a PCI DSS is a set of guidelines that provide businesses with a best practice framework on security, both educating businesses and supplying the tools that enable them to get on your business doesn’t take card fraud seriously. Treating your customer’s card data securely moving to ensure that they are not putting their with doing what they do best. should be part of building brand loyalty and customers’ card details, or their business at risk. After all, you can’t expect every firm to fully providing a good customer experience — a key Banks are gradually insisting that all merchants understand compliance issues. That’s not their differentiator in the online space. Finally, work accepting card payments reach a recommended core business, but it is ours, and that’s why we’re with suppliers that understand your business level of compliance to safeguard merchants and well placed to help. and share your passion for it. consumers against card fraud. Simon Black, managing director of Sage Pay Q why are there so many regulations and requirements? Q pci Dss isn’t a legal requirement, so why should businesses take it seriously? www.sagepay.com