Cross Border E-commerce:
Challenges and Opportunities
Howard Bell,
Head of Online Payments, Barclaycard
Internet Retailing ‘Payments & Fraud’
11th February 2010
payment acceptance
Challenges and Opportunities
• european eCommerce trends
• market opportunities and challenges for retailers
• beating fraud
payment acceptance
Cross Border eCommerce Feb 11th 2010
2
In EU markets, where internet penetration is low,
e-commerce is growing rapidly …..
European e-commerce: online retail sales
(Source: Forrester)
30 0 ,0 0 0
250 ,0 0 0
€ millions
Res t o f Euro p e
No rd ics
20 0 ,0 0 0
Benelux
Sp ain
150 ,0 0 0
It aly
France
10 0 ,0 0 0
Germ any
50 ,0 0 0
0
20 0 5
Unit ed King d o m
20 0 6
20 0 7
20 0 8
20 0 9
20 10
20 11
Source: Forrester Research 2008
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Cross Border eCommerce Feb 11th 2010
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The European E-commerce Landscape
The Headlines
• The European eCommerce payments market is worth €230 billion; €95 billion from the
UK
• Visa and MasterCard are top 2 EU payment methods; PayPal is 3rd
• There are approximately 500,000 e-commerce merchants across the EU – and 1/3 of
these are internet only stores
• France, Spain and Italy are the fastest growing markets but currently have low internet
penetration
• PCI DSS is a Global (and hence pan-European) requirement
• Increasingly Tier 2 EU merchants are seeking a hosted paypage (acquiring and gateway
combined)
Source: Barclaycard Proprietary Research, 2010
payment
acceptance
Border
11th–2010
Global Payment
Acceptance Barclaycard Cross
SmartPay
– EUeCommerce
Marketing & Feb
Roll-out
07.01.2010
4
European shoppers expect choice
Simple payments?
“Which payment method (s) do you prefer when you buy products online?*”
Credit card
40%
60%
35%
26%
51%
51%
19%
34%
Electronic bank transfer
26%
3%
3%
56%
20%
14%
43%
43%
Debit/payment card
24%
43%
57%
3%
14%
10%
14%
17%
PayPal
23%
35%
16%
22%
14%
26%
11%
11%
Cheque/accept giro
19%
5%
17%
31%
2%
19%
37%
13%
Cash
10%
3%
3%
10%
32%
19%
16%
24%
ELV DE
Maestro/Solo UK
iDEAL NL
Carte Bleue FR
Source: Forrester Research Inc
* Forrester allowed Consumers to select preferred methods and allowed multiple votes (hence totals>100%)
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Opportunities are real; challenges need active
management
Opportunities
Challenges
• New Markets
• PCI DSS
• New Payment Streams
• Fraud & Chargebacks
• New Shoppers
• New Payment Methods
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International CNP Fraud*
International CNP fraud, Nov 2009
Headlines
£1.0
£0.9
• Decline in CNP Fraud (-13%) vs
£0.8
2008
• CNP Fraud still 60% of total
fraud
• Top 5 buyer countries are US,
Spain, Ireland, Cyprus and
France
• Mix skewed towards Credit but
Debit increasing
(Credit 48% , Debit 40% , Charge 12%)
£0.7
£0.6
£0.5
£0.4
£0.3
£0.2
£0.1
£0.0
US
Spain
Ireland
Cyprus
France
Gibralter
Luxembourg
Germany
Italy
Holland
* as at Nov 2009
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Barclaycard’s Approach to Beating Online Fraud
• Industry-Leading Performance–losses 40% lower than UK average
» Robust vetting and advanced risk analytics
• Partnership approach with customers
» Active collaboration with card schemes to identify & block fraudulent buyers
» Leading Influence over Risk Policy e.g. PCI DSS
• New Propositions
» “Fraud Reporter” – online daily file (PGP) to prevent dispatch to fraudsters
payment acceptance
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your questions?
payment acceptance
Confidential
What is Payment Card Fraud?
Involves the use of a credit/debit card without the consent of the genuine cardholder
or the account itself has been set up fraudulently.
Fraud types include:
• CNP Fraud – merchant, retailer or service provider has no physical access to payment card.
e.g. Internet / Mail Order / Telephone / Fax
• Counterfeit Fraud (cloned / skimmed) – A plastic card that has been printed, embossed or encoded so
as to purport to be a genuine payment card issued with the authority of the genuine issuer
• Identity Theft / Fraud – Where someone uses your personal information such as name, payment card
number or other identifying information without your permission to commit fraud or other crimes
– Mail Interception / Social Engineering / Phishing / Malware Attacks / Raiding Bins
• Other Fraud Types – Lost & Stolen / Non Receipt of Mail / Application Fraud
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What is acquiring fraud?
Collusive
Genuine
Fraud Occurs
at Retailer
• 1st Party Fraud by BPA
Retailer
• 3rd Party Fraud at BPA
Retailer
Chargeback right..
Shopper has rights
Issuer Chargeback
Shopper has rights
Issuer Chargeback
Issuer has no chargeback
right
right exists
Issuer has no chargeback
right
right exists
• Where cardholder
authentication exists Chip & PIN or 3DS)
• CNP / No 3DS
• Where cardholder
authentication exists Chip & PIN or 3DS
• Card Present - No
supporting evidence,
signatures etc
• CNP / No 3DS
• Card Present - No
supporting evidence,
signatures, verification
etc
Loss..
No loss to BPA or retailer
• Fraudulent funds
recovered as a result of
freezing bank accounts &
diverting pdq
payment acceptance
• Acquirer loss.
Loss to BPA = Retailer
unable to pay chargebacks
• Retailer loss
• Issuer Loss
Cross Border eCommerce Feb 11th 2010
• Fraud Debt owed to BPA.
Resulting from fraud
activity at the retailer.
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Customer Recruitment – Best Practice
Online customer additional information – Best practice
-
Customer service number
E-mail address to contact company
Statement on risk & fraud controls
Delivery methods & timings
Age verification methodology (age restricted goods & services)
Refund & returns policies
Privacy statements (permissible uses of customer information)
Depending on the type of customer, perhaps a terms of service and / or acceptable use
policy
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Customer Recruitment – Best Practice
Trading information
− Nature of goods & services
− Design of home page & location of billing pages
− Price patterns
− Merchant location (Physical & Legal)
− Ave or projected turnover
− Ave or projected refund volume & refund policy
− Ave or projected chargeback or fraud rates
− Disclosure of all payment mechanisms offered
− Disclosure of all sales channels inc all URL’s or referral sites
− Check validity of telephone numbers / email addresses / listed [personal & other contact
information
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