The internet maybe global, payments are not
21 May 2003

For companies that engage in global e-commerce, maintaining control over numerous websites is no small task. Handling different languages and cultures is one issue, but some experts say it is not the biggest challenge.

"Merchants have to deal with a lot of constraints. Translating web pages into local languages is comparatively easy," says Chuck Wade, an internet payments and e-commerce security consultant with Interisle Consulting Group, a Boston-based consultancy.

More problematic are the issues surrounding the management of payment systems across borders. "Every nationality has a variance in its payment systems, such as different legal requirements and accounting practices," says Mr Wade.

With country-specific rules relating to the classification of goods, differences in the end-price of products after local duties, taxes and administrative fees and the differing paperwork associated with shipping goods to different countries, global e-commerce is a complex organism.

One of the major challenges facing merchants who wish to expand abroad is working with different payments. In the US, 95 per cent of consumers use credit cards, compared with only 20 per cent in Germany.

There are almost as many different ways for paying for goods and services in Europe as there are countries.
According to research undertaken by Bibit, the Dutch-based global payment services company, Switch is one of the most popular online payment methods in the UK. In France, Carte Bleue (CB) is most widely used. In Germany, there is the Elektronisches Lastschrift Verfahren (ELV), while the Swedes preferred mode of payment is Nordea Solo.

"In Europe you don't have a choice but to accept alternative payment methods," says Joost Schuijff, chief executive and co-founder of Bibit. "If you think the credit card is the only choice, you don't go global. If you want to sell in multiple markets you have to learn to adapt. It's like learning to speak German when you go to Germany."

Bibit is working with a number of international companies including Dell Computer, low-cost airline Hapag-Lloyd Express and florist Interflora.com on meeting the local payment needs of these merchants' customers.
Hapag-Lloyd, for instance, has its target audience in Germany, but plans to expand into multiple European markets in the near future. So Bibit has already integrated ELV and credit cards into its solution and will add other payment methods soon.

However, some globally-minded companies are being more cautious. Travel company Expedia is more reluctant about accepting alternative payment methods. The company, which offers its services in seven countries, currently accepts only credit card payments, but is launching Switch and Solo payment options for its UK website later this year.

"Our business is such that the average transaction is pretty large so it's important for us to get confirmation that funds are in good standing," says Bret Myers, treasury manager of Expedia Inc.

Indeed, security is a major issue for global vendors. Credit and debit card fraud, the third biggest fraud category (after auction fraud and non-delivery complaints,) represents 11.6 per cent of all cases reported in 2002 to the US Internet Fraud Complaint Center (IFCC).

Merchants are implementing rigorous security systems to mitigate the risks. E-commerce sites are keeping increasingly detailed, centralised customer records. Vendors are asking customers for additional security numbers on their cards, and conducting real-time authorisation checks with the customers' financial institutions. With Verified by Visa, Visa's shopper authentication programme, for instance, card issuers verify users' identities in real-time during transactions on merchants' websites.

Some payment solutions providers, such as California-based OpenHarbor, are even going so far as scouring Black Lists daily to check that customers are not planning to launch terrorist attacks from the computers they purchased online.

"Given the rise of global terrorism it is imperative that the seller ensures that the party buying the goods does not intend to use the goods, especially dual purpose goods such as computers, night vision goggles and certain medicines, to promote terrorism," says Mahipal Lunia, solutions director at OpenHarbor.

The growing need for seamless, secure and adaptable global payment systems across multiple different and constantly changing countries, is creating a fast-growing market for third-party payment solutions providers such as Bibit, OpenHarbor and WorldPay.

"Outsourcing has several key benefits," says Simon Fletcher, global communications manager for WorldPay, the global payment solutions subsidiary of The Royal Bank of Scotland Group. "Relinquishing control of the payment acceptance on your websites frees employees to focus on core business; security headaches are greatly reduced because the retailer doesn't see, capture or store the payment details; and fraud detection is possible using one centralised service that gathers data from millions of international transactions rather than just US, UK, or European data."

As valuable as are the services these third-parties provide, the implementation of additional security or multi-payment features comes with one drawback: cost. Simply put, the more intricate the system, the higher the cost to the merchant or consumer.

"Multi-language, multi-currency, multi-tax support has been an embedded feature in many billing systems for years. Adding these features is not a barrier but does increase the average cost of handling a transaction, this cost being passed on to the customer or intermediary merchant," says David Tansley, UK communications practice principle of Deloitte Consulting.

"Any payment constraints imposed by a business are likely to have to be offset by other incentives, typically lower prices

© Copyright The Financial Times Limited 2003 .