Which payment system is right for your business and your clients
E-Commerce Made Simple
By Zulf Choudhary of
1. About Us
2. The Market Challenge
3. The Solution- Ecommerce
4. How Does It Work
5. Building Blocks Of Success
6. The Key Factors
7. Its About Risks
8. Risk Calculations
9. Types Of Payment Providers
10. Costs and Catches
11. Other Factors
13. Appendix List
• Founded in 2005 University of Manchester
• 7 key staff for project and IT development in UK
• Public sector & technology delivery partners
• FSA regulated to issue e-money
• Custom and Excise Licensed Money Transfer Agent
• Key Strategic Partners
• Software outsourcing offices in China 45 staff
2008 In 2
2009 In 2
The Market Challenge
The internet and mobiles have changed consumer buying
behaviour,; what, when and how they pay. Merchants must
react to these changes or fail. Some Facts:
• £46.6bn was spent online during 2007 (IMRG, January 2008)
• 21.3m people now shop online in the UK, spending an average of
£661 each in the last six months (BMRB, August 2008)
• By 2011 32m UK consumers will be shopping online. The value of
goods they buy online in 2011 will add up to almost £52bn.
(Forrester, UK eCommerce Forecast 2006-2011, March 2007)
• Over 3.5 million people bought online on Christmas day in 2009!
BMRB, Feb 2009
• Juniper: Mobile Application Market Worth £18billion world wide *
So online and mobile is where the money is made.
Electronic commerce, commonly known as e-commerce or
eCommerce, or e-business consists of the buying and selling of
products or services over electronic systems such as the Internet
and other computer networks.
1. Amazon-book store
2. Dell-computer systems
3. EBay-exchange market place
4. PayPal-online payments
1. Mobile Apps
2. Angry Birds
3. Paddy Power
How Does It Work?
1. Apply to a bank for a merchant service or Payment Gateway(or payment
service provider (PSP).
2. Negotiate the costs.
3. On acceptance, pay the set-up costs.
4. Receive and install a PDQ machine.
5. Key Pin number to collect their credit or debit card details.
6. Wait for the acquiring bank for approval.
7. Verify and hand over goods.
8. A transaction charge is automatically paid to the bank.
9. The customer leaves with the goods or service.
10.You get paid for goods
Ten steps in getting paid online:
Sounds easy? But now the difficult bit.
Building Blocks For Success!
Order forms &
Secure Area for cards
DATA EXCHANGE by VISA or
Terms & Conditions
Website/Mobile App/ Retail
The Key Factors
- Your risk to the bank: type of goods you sell, the area you
trade in, bonds and guarantees, the right e-commerce provider
- Your customers risks: Returns (chargeback's), stolen cards,
card holder not present risk.
• Channels to market
Website, store or mobile; what device, all devices or just one?
Software off the shelf or designed for you?
Can you pay for all or just one channel?
Costs vary from a £250 to £20,000,000! In house or outsourced.
Who manages it the complexity
Risks of failure of the systems or parts.
Before starting consider the following issues:
Its About Risks
A bank looks at the risks of you and your customer before agreeing to
give you a online account. Why?
• Fraud and charge backs = cost of doing online business with you.
• A look at charge-backs – when a customer demands a refund from
their credit card company.
• Banks protect themselves against charge-backs by retaining
customer payments for around a month before crediting your
• Internet transactions can be prone to fraud.
• You may need to lodge a bond to cover yourself against fraud.
• Good terms and conditions on your website will help.
In perspective: Fraud represents only 15 to 30 minutes of loss in a full year
of trading for many banks. So why concerned?- Brand Reputations
Exposure is the acquiring bank estimate of the total risk you are
exposed to at any one time, for instance, the number of sales open to
refund over a given period. Your exposure level will also affect the
charge bands offered to your business, i.e. monthly charges and
1. Charge-backs – the risk of refunds on your merchant account;
2. Forecast turnover figures – higher turnover can generate higher exposure;
3. Average transaction size – if you sell very high value items (diamonds, cars) this
will influence the risk analysis of your business;
4. Time from payment to order fulfilment – The longer it takes to dispatch goods to a
customer, the greater the risk of an order cancellation;
5. Length of trading record – a start-up company presents more risk than a well
6. Business sector classification – different sectors have more or less risk associated
with them (CDs can be resold but a flight needs the purchaser to turn up in
person). Some banks have over 700 different business sector classifications.
7. Safeguards you have in place – security checks like verifying address details or
phoning customers who place large or repeated orders will reduce the perceived
Types Of Providers-Examples
Credit & Debit Bureau Provide Extras
- WorldPay Payment Gateway Shopping cart, reports etc
- PayPal Payment Gateway Shopping cart, reports etc
- Bucks Net Payment Gateway Shopping cart, reports etc
- Netbanx Payment Gateway Shopping cart, reports etc
Merchant account providers
- Streamline Merchant ID
- Major Banks Merchant ID
- Pay2Go Mobile design for e-commerce
- Apple Inc Mobile bureau service
- Ovi Store Nokia devices
Banks/Post Off Cheques and postal orders
- PayPoint Cash collection for bills
- PayZone Cash collection for bills
Web design and shopping cart providers (Actinic etc, OS Commerce) etc
Costs & Catches
Example of costs
Set-up Recurring Costs Charges
Generic Acquiring £200 £10
2% - 3.35% per credit card transaction
£0.25 - £0.35 per debit card transaction
NetBanx PSP £75 £10 from 1% to 4% per transaction
Worldpay £200 £360 (annual) 4.5% credit cards, £0.50 debit cards
Main costs are listed below but are not relevant to all products
• Setup Cost: ranges between £50 and £250, if applicable £120 is the average.
• Annual Cost: normally around £150 but often not applicable.
• Monthly: The most standard charge especially from acquiring banks, around £10-25.
• PSP: Can be a commission of as little as 1% but often about £10 per month or 3-4%.
• Transaction Charge: 2.79% for an established business but up to 4-5% otherwise.
• Bond: dependant on exposure level but is often negotiated down.
• Charge back £7 to £29 for each item
• Mobile Payments fees 5% to 30% per transaction
• Website design-clear and direct guide to buying page!
• Mobile design-simple to use and well designed-guide users to buying area!
• User experience-MAKE IT SIMPLE STUPID!
• Users convenience-make it easy
• Marketing and PR
• Quality of Service
What sets you apart from others? What is your unique selling point in the view of your
customers? How do you stand out!
Examples: Call of Duty Game, iPhone, Amazon, Tesco, Micro Direct etc. Look at how
others have done it.
Its all about good design and user experience- remember a good ecommerce business is
orchestra of many parts!
Electronic commerce is about online selling, taking users to a place they feel secure and
happy to buy goods or service.
Many issues and challenges can trip the unwary but if you think rationally and positively you
could make millions.
Consider the following:
- Online and mobile channels (do not forget that TV, radio and newspapers all depend on e-
commerce of one type or another!)
- Look at your budget.
- Look at all the risks.
- Decide on payment gate provider.
- Look at the at total user experience with you.
- Negotiate the best deal for your payment package.
- The set-up costs may been high and the work daunting but its work it.
The market is worth over £52 Billion and growing!
Thank you for listening
If you have any questions please contact me
Telephone: 0161 306 5848
University of Manchester
Arch 29, PO Box 88
Appendix-List of Services Providers
ChronoPay Bureau http://www.chronopay.com/
ePDQ Barclays bank http://www.barclaycard.co.uk/business/
Moneybookers LTD http://www.moneybookers.com/app/
PO MoneyGram http://www.postoffice.co.uk/
Splash plastic card http://www.splashplastic.com/
SecureTrading Merchant Account http://www.securetrading.com/
SecPay-owned by PayPoint http://www.paypoint.net/secpay-payment-gateway/
RBS WorldPay http://www.rbsworldpay.com/
Ovi Store-mobile https://store.ovi.com/
This is not an exclusive list-please search the web for more providers