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

Brion BonkowskiManaging Director

July 16, 2013

Boot Camp Week 5Improve your Payment IQ

Alternative Payments: Where Plastic isn’t King

How to Implement AP?

Technology Options

What Next?

Q&A & Contact Information

Introduction

Who is Interested in Payments?

Why Alternative Payments?

Alternative Payments Overview

Type of Alternative PaymentsDirect DebitseWalletsReal Time Bank TransfersPrepaid CardsCash Transfers

Agenda

Who is ROI Payments & Why a Boot Camp Series?

Who is interested in payments?

The end result?

Introduction

How important is it to support alternative payments in international markets?

The Alternative payments market is set to grow by 13% by 2015

230 Alternative payment schemes in operation across the globe today

€ 165B in global ecommerce transactions = 22% of total volume

Regionally, Germany, the Netherlands, and AsiaPac are significant while neighboring countries, such as France, have very low adoption

By 2015, alternative payments will outpace the use of cards, especially in developing economies such as Brazil and India

Global Trends Toward Alternative Payments

With 230+ payment types, how do you pick the right one for your business?

We will now review payment types by popularity over the next few slides.

Global Trends Toward Alternative Payments

Alternative Payments by Type: Bank Transfers

Real time Bank Transfers Benefit: Customers money is present in bank account at time of transaction Weakness: Requires hosting or re-direction Example Schemes:

Offline Credit Benefit: Transfer confirmed before goods processed, resulting in no chargeback risk Weakness: Time to receive funds can be longer Example Schemes:

Direct Debit Benefit: Easy to use and natural customer retention Weakness: Scheduled payments so a higher risk of chargebacks and a delay for settlement Example Schemes:

Alternative Payments by Type: Others

eWallets Benefit: Customers money is present in account at time of transaction Weakness: Often relies on re-direct and can carry a high(er) transaction fee Example Schemes:

Paper Based Benefit: No chargeback risk Weakness: Time lag, lower order completion, and usually higher cost Example Schemes:

Mobile Benefit: Easy of Use Weakness: Time lag in payment, can be very high cost (as much as 50%) Example Schemes:

Drivers for Alternative Payments Growth

Technology:“Push” – New alternative payment vendors are driving innovation and

providing customers with a faster and more efficient means for paying for goods and services

“Pull”- New types of goods and services in the digital realm: games, eBooks, virtual items require foster, more flexible ways to pay

New Generation of Shoppers:18-30 year olds are much more likely to be receptive to alternative

payment methods; Older (65+ shoppers) are the least likely

Profitability of Choice:

Alternative Payments in Developing Economies

China and India are expected to soar in the coming decades and are some have an incredibly high adoption rate for alternative payments:

China AliPay accounts for Billions in payments alone Online economy is growing by 22% annually

India Real time bank transfers dominate the payments landscape Online economy is growing by 40% annually

*Also of note is Brazil whose online growth rate is close to 18%

In Which Verticals are Alternative Payments Taking Off?

High Penetration:

Gaming & Gambling- eWallets very prevalent

Adult- driven by personal privacy

Video Games- micro transactions and younger customers

Digital Content- driven by direct debit in many markets

Medium Penetration

Global eCommerce- PayPal drives a lot of this growth

Telcoms- emerging geographies pair telco with payments

Ticketing, entertainment, and Services

Low Penetration Airlines & Travel- higher tickets lead more toward traditional card types

Local and regional retail, government, education and utilities- traction dependent on geographies

Alternative Payment Share by Scheme: Major Markets

Alternative Payment Share by Scheme: Smaller Markets

Ok…So how do I implement these new schemes?

Alternative Payments Capabilities vs: Credit Cards

Depends on the type of alternative payment, the following are GENERAL characteristics:

Bank driven payments are often less expensive than credit cards

Often uses a 3-party or closed loop network

Requires a gateway that is capable of handling various transaction flows

Less risk of chargeback, particularly in the use of real-time bank transfers

Some schemes may have time lag in settlement

Gateways that Support Alternative Payments

Implementation Notes to Consider when Implementing AP

May need to set up EU (or other local) entity and/or bank account

Option to use aggregation/eWallet options to enable multiple alternative payment methodsFees may be higher on the transactions, but simplification of entity/corporate side

and time to market benefits may outweigh the costs

Technically, many of these schemes rely on a redirect or a hosted payment page

Reconciliation considerations as each scheme may have a different settlement amount

Sample Plan to Expand into Alternative Payments

Start-up Fee & Monthly Gateway Fees: Can range from $100 set-up to $2,500 and monthly fees from $25-$200.

Transaction Fees: vary by scheme and implementation methodCount on 4-8% for aggregation model (no local entity)<1% for some locally acquired options

Typical Implementation Schedule: 2-4 weeks (assuming support for multi-currency already exists)

Teams involved: marketing, finance, and IT

So What Next?

Research what markets your company is looking to tackle to see if alternative payments make sense strategically

Find a partner who can help you drive mass adoption amongst your customer base and assist you in implementing the right technology/gateway

Test, test, and test again: be sure your conversion rates reflect the work that has gone into your implementation

Contact Information:Brion [email protected] x: 2134

Questions & Contact Info