2. Different travel sectors and payment issues facing them
◦ Hotels – prepaid
◦ Airlines – chargebacks
◦ Others – OTAs, car rental, cruises
Alternative Payments Background (Refresher)
◦ AP summary
◦ Types of alternative payments
Pros and cons of selected APMs
Cost Comparison
PSPs and reservation systems
Summary and recommendations
3. Hotels
◦ Prepaid vs. post paid, some payment methods are better for pre paid
◦ Payer mentality when it comes to prepaying via bank account
◦ Card chargebacks, friendly fraud, lost/stolen card numbers
◦ High ATV so card processing fees are high comparing to flat fees of APs
Airlines and travel agents
◦ Higher rate of chargeback for cards whilst bank payment methods have less
opportunity to charge back
◦ More fraud in the travel industry as there are different fraud patterns in different
regions and relatively long time between payment and fulfilment
◦ High ATV so card processing fees are high
Others: Car hire, Cruises
◦ Often prepaid in full or elements, high ATV
◦ OTA – inventory holding, need immediate clearing
Figures
◦ The online travel is expected to grow to $313 billion by the end of 2012,
representing 30% of the total travel market. In 2013, one third of all payments
made for travel & tourism purchases will be made online (source Payvision report)
4.
5.
6. European markets are very varied in terms of which alternative
payments are used and to which degree
From very card focused markets such as France where over 80% of
ecommerce transactions are paid for in cash or Italy with 70%
respectively, to Germany with 22% on cards and Netherlands with
less than 10% respectively
Alternative payments also vary from very sophisticated automated
banking services (Ideal, Nordea) to more physical methods such as
cash on delivery or off line bank/post office transfer
Therefore the Alternative Payments strategy needs to take into
account which markets you are going to sell in to ensure that you
get the right mix of payments both for your needs and to meet the
customer expectations
7. Bank payments
◦ Online bank transfers (Ideal, Giro, Nordea)
◦ Off line bank transfers
◦ Direct Debits
◦ Money remittances/Cash (Post, MG, WU)
Wallets (Paypal, Skrill, CashU, Yandex, V.me)
Mobile (Wallets, Pperator Bills, Tansfers)
Prepaid cards (Safepay, Ucash, Wallie)
Local cards and other local schemes (Carte Bleue,
Dankort)
8. Good for most type of ecommerce, but limited to
countries where service exists, albeit different in every
market
Real time payment using an
online banking system and a
clearing arrangement in
countries where this has been
set up
The consumer is redirected to
their online banking long in
page, the amount and
payment details are pre-
populated, the confirmation to
the merchant is instant
Pros
◦ Guaranteed payment
◦ Immediate authorisation response, quick clearing
◦ In some countries consumer prefers to pay with debit
vs. credit
◦ High usability in European markets (Germany,
Netherlands, Austria, Scandinavia)
◦ More competitively priced especially for high ATV
Cons
◦ Worldwide less usage than cards
◦ Need different integration for each and an
understanding of each scheme, whilst cards are
uniform worldwide
◦ Not entirely a pull payment mechanism, the
customer still has to press ‘ok’ on banking page
9. iDEAL is a standard payment method for making secure online
payments directly between bank accounts. When you offer iDEAL
as a payment method in your online store, a direct link is
established with the systems of your bank
http://www.ideal.nl/demo/eng-GB/web/01.html
more than 70,000 online stores
10 million consumers already use online banking in NL
Mobile payments available
Cost – 10-40 € cents depending on volumes and PSP
10. Good for recurring, Low fraud and ‘high necessity’
products (e.g. mobile subscription, database
services)
Direct debits are widely used
in many countries
UK, Germany, Austria,
Belgium, Poland, Spain,
France, NL, USA (ACH)
The customer gives authority
to the merchant to debit his
account often on a recurring
basis, but can ‘chargeback’ the
transaction for a very long
period of time
Pros
◦ Pull payment method like credit/debit card
◦ Guaranteed payment
◦ In some countries consumer prefers to pay with debit
vs. credit
◦ High usability in European markets
◦ Very competitively priced especially for high ATV –
flat fee generally
Cons
◦ Long chargeback period, growing fraud
◦ Cleared funds take a week+ but OTA/Airline needs to
commit to inventory immediately
◦ Worldwide less usage than cards and in some
markets mainly for utilities
◦ Need different integration for each and an
understanding of each scheme, whilst cards are
uniform worldwide
11. Good for markets with limited online payment
options to increase your geographical reach
These are money transfers
where the consumer doesn't
have a bank account and goes
into an office or an affiliated
shop/location to put cash in
Western Union, Moneygram,
Boleto, Konbini, Santander
and others
Pros
◦ Addresses unbanked population or countries
where there are not many online payment
options
◦ Guaranteed payment
◦ Widely used in underbanked markets and is
customary for unbanked consumers
Cons
◦ Can be quite expensive
◦ A Push payment mechanism, so needs an action
(often physical i.e. going to post office, from
consumer)
◦ Cleared funds take a number of days but need to
commit to inventory immediately
◦ Need different integration for each and an
understanding of each scheme, whilst cards are
uniform worldwide
12. Good for markets with high consumer penetration, if
international can be one shop stop solution, if local – a
good competitive tool
There are many different
wallets globally with some
being international as Paypal
and many specific to their
markets as Yandex or
Webmoney for Russia.
Visa and Mastercard are
launching their wallets V.me
and PayPass respectively and
there are more to come from
different quarters
Pros
◦ High usage in some markets
◦ Customer feel more secure by not sharing
their card details online – often an issue for
the travel sector
◦ Quick checkout process, less opportunity to
drop out
◦ Immediate authorisation response, quick
clearing
Cons
◦ Can be expensive, often costs more than
cards
◦ Often is still funded by a card, so does not
necessarily open up to a new target
segment (e.g. Underbanked)
13. Online Bank Transfers are generally a combination of a flat and a
percentage fee, average* being 2% and €0.30, although going with a local
provider can cut costs considerably
Direct Debits are mainly flat fees around €0.35-0.45
Money Remittances are generally a combination of a flat and a percentage
fee, average being 2% and €1.00
Wallets tend to be a little more expensive on average around 3%, but some
are negotiated directly with provider (e.g. PayPal) although can still be
processed via PSP
Cards for comparison are around 2-3% including PSP and Acquiring
charges, internal costs for processing and managing fraud and
chargebacks
Comparing Bank Transfers to Cards for an average transaction value of
€200 the saving is can be at least €0.70 and for the ATV of €600 around
€2.70. For a million transactions that nearly €3M!
*fees are quite different for different systems, we attempted to find an average number
14. Chargebacks
◦ There are different chargeback rates with different payment methods as
mentioned earlier
◦ Leads to significant savings in chargebacks especially in high fraud
verticals (travel is often considered as such)
◦ E.g. Online Bank Transfer has virtually zero chargeback so if your
chargebacks are 2-3%, it can save hundreds of thousands
Fraud
◦ Although fraud in APMs is growing (see Experian report on UK DD) it is
still a lot less common than credit/debit card fraud
◦ This can also lead to significant savings by spreading the risk
PCI Compliance
◦ PCI DSS applies only to international credit/debit cards, and although
there are some APM specific security requirements for each scheme
they tend to be less of a cost burden than PCI
15. Each merchant is different!
◦ Of course to find out the exact savings one needs to
look into each merchants business in detail. The
following should be considered:
Markets where plan to sell and appropriate APMs
Products and price points
PSP or combination of PSPs and/or Banks
Direct connectivity vs. one stop shop strategy
Utilising reservation systems for payments
16. Some have long list of APMs already in place
Need to check if same interface or if more integration work is
required (including integration fees if any)
Some are more flexible than others to add new features
upon merchant request
There are generally cost implications to build a business
case for each new feature
There are also often regular monthly maintenance charges
making it more cost efficient to use small number of payment
providers/PSPs
Experience says that not many PSPs can do all markets
equally so for truly international cover a complimentary
mixture of Global and Local PSPs may need to be
considered
17. Reservation Systems have
PSPs connected to them for
various payment services
Some have direct APM
integrations themselves
When considering alternatives
it’s good to see the full picture –
it maybe provided by a mixture
of the two – PSP and the
Reservation System
18. Within Travel industry different sectors have their own issues to address
Alternative Payment Methods are plentiful and often talked about, but
merchants need to consider where they operate, what they sell, who their
providers are to make sure they get the right mix in order to truly reduce
costs
Each APM has it’s pros and cons and the fees vary widely, some were
given here, but needs to be considered for each merchant and their market
individually
Generally the APM fees have a flat fee component what makes them
more cost efficient for higher ATV (as in travel sector)
Savings can also be made on Chargebacks by using one payment
method vs. another as well as on Fraud losses and PCI DSS process
management
Today many PSPs offer APMs but merchant needs to understand what
those are, what type of interface is required, how quickly new ones can
be added on demand and finally if some can be achieved via reservation
systems
