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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                                      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
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                                         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.
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                                 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.”
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                                       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
E Money 2010 Oct09
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E Money 2010 Oct09

  • 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