Payment IQ Bootcamp #5 - Alternative Payments, What to Do When Plastic Isn't King?


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While plastic, via credit and debit cards, dominate electronic transaction methods in the West, that isn't the case in global markets. This webinar explains how merchants can develop a strategy to evaluate and implement some of the 200+ alternative payment methods used throughout the world.

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Payment IQ Bootcamp #5 - Alternative Payments, What to Do When Plastic Isn't King?

  1. 1. Brion Bonkowski Managing Director July 16, 2013 Boot Camp Week 5 Improve your Payment IQ Alternative Payments: Where Plastic isn’t King
  2. 2.  How to Implement AP?  Technology Options  What Next?  Q&A & Contact Information  Introduction  Who is Interested in Payments?  Why Alternative Payments?  Alternative Payments Overview  Type of Alternative Payments  Direct Debits  eWallets  Real Time Bank Transfers  Prepaid Cards  Cash Transfers Agenda
  3. 3.  Who is ROI Payments & Why a Boot Camp Series?  Who is interested in payments?  The end result? Introduction
  4. 4. How important is it to support alternative payments in international markets?
  5. 5.  The Alternative payments market is set to grow by 13% by 2015  230 Alternative payment schemes in operation across the globe today  € 165B in global ecommerce transactions = 22% of total volume  Regionally, Germany, the Netherlands, and AsiaPac are significant while neighboring countries, such as France, have very low adoption  By 2015, alternative payments will outpace the use of cards, especially in developing economies such as Brazil and India Global Trends Toward Alternative Payments
  6. 6. With 230+ payment types, how do you pick the right one for your business? We will now review payment types by popularity over the next few slides. Global Trends Toward Alternative Payments
  7. 7. Alternative Payments by Type: Bank Transfers Real time Bank Transfers  Benefit: Customers money is present in bank account at time of transaction  Weakness: Requires hosting or re-direction  Example Schemes: Offline Credit  Benefit: Transfer confirmed before goods processed, resulting in no chargeback risk  Weakness: Time to receive funds can be longer  Example Schemes: Direct Debit  Benefit: Easy to use and natural customer retention  Weakness: Scheduled payments so a higher risk of chargebacks and a delay for settlement  Example Schemes:
  8. 8. Alternative Payments by Type: Others eWallets  Benefit: Customers money is present in account at time of transaction  Weakness: Often relies on re-direct and can carry a high(er) transaction fee  Example Schemes: Paper Based  Benefit: No chargeback risk  Weakness: Time lag, lower order completion, and usually higher cost  Example Schemes: Mobile  Benefit: Easy of Use  Weakness: Time lag in payment, can be very high cost (as much as 50%)  Example Schemes:
  9. 9. Drivers for Alternative Payments Growth Technology: “Push” – New alternative payment vendors are driving innovation and providing customers with a faster and more efficient means for paying for goods and services “Pull”- New types of goods and services in the digital realm: games, eBooks, virtual items require foster, more flexible ways to pay New Generation of Shoppers: 18-30 year olds are much more likely to be receptive to alternative payment methods; Older (65+ shoppers) are the least likely Profitability of Choice:
  10. 10. Alternative Payments in Developing Economies China and India are expected to soar in the coming decades and are some have an incredibly high adoption rate for alternative payments:  China  AliPay accounts for Billions in payments alone  Online economy is growing by 22% annually  India  Real time bank transfers dominate the payments landscape  Online economy is growing by 40% annually *Also of note is Brazil whose online growth rate is close to 18%
  11. 11. In Which Verticals are Alternative Payments Taking Off? High Penetration:  Gaming & Gambling- eWallets very prevalent  Adult- driven by personal privacy  Video Games- micro transactions and younger customers  Digital Content- driven by direct debit in many markets Medium Penetration  Global eCommerce- PayPal drives a lot of this growth  Telcoms- emerging geographies pair telco with payments  Ticketing, entertainment, and Services Low Penetration  Airlines & Travel- higher tickets lead more toward traditional card types  Local and regional retail, government, education and utilities- traction dependent on geographies
  12. 12. Alternative Payment Share by Scheme: Major Markets
  13. 13. Alternative Payment Share by Scheme: Smaller Markets
  14. 14. Ok…So how do I implement these new schemes?
  15. 15. Alternative Payments Capabilities vs: Credit Cards Depends on the type of alternative payment, the following are GENERAL characteristics:  Bank driven payments are often less expensive than credit cards  Often uses a 3-party or closed loop network  Requires a gateway that is capable of handling various transaction flows  Less risk of chargeback, particularly in the use of real-time bank transfers  Some schemes may have time lag in settlement
  16. 16. Gateways that Support Alternative Payments
  17. 17. Implementation Notes to Consider when Implementing AP May need to set up EU (or other local) entity and/or bank account Option to use aggregation/eWallet options to enable multiple alternative payment methods  Fees may be higher on the transactions, but simplification of entity/corporate side and time to market benefits may outweigh the costs Technically, many of these schemes rely on a redirect or a hosted payment page Reconciliation considerations as each scheme may have a different settlement amount
  18. 18. Sample Plan to Expand into Alternative Payments Start-up Fee & Monthly Gateway Fees: Can range from $100 set-up to $2,500 and monthly fees from $25-$200. Transaction Fees: vary by scheme and implementation method  Count on 4-8% for aggregation model (no local entity)  <1% for some locally acquired options Typical Implementation Schedule: 2-4 weeks (assuming support for multi-currency already exists) Teams involved: marketing, finance, and IT
  19. 19. So What Next? Research what markets your company is looking to tackle to see if alternative payments make sense strategically Find a partner who can help you drive mass adoption amongst your customer base and assist you in implementing the right technology/gateway Test, test, and test again: be sure your conversion rates reflect the work that has gone into your implementation
  20. 20. Contact Information: Brion Bonkowski 212.812.4177 x: 2134 Questions & Contact Info