Saturday, March 14, 2009

Pago Report 2008 - E-Commerce Payments

Pago Report 2008 – Trends in consumer and payment behavior in e-commerce based on real transactions

Deutsche Bank report valuable to online merchants

Cologne, Germany, Mar. 13, 2009 -- In European online retailing, risks of non-payment are much lower for women than for men. This is indicated by a lower chargeback ratio, which describes the share of credit card transactions which had to be charged back after the cardholder rejected the transaction. At roughly 0.10%, female consumers' non-payment ratio for online purchases paid for by credit card is only half that of male customers (0.19%). One year before the opposite was true. This is one of the results of the Pago Retail Report 2008, which was recently published by Deutsche Card Services, a subsidiary of Deutsche Bank.

Chargeback ratio remains low in the retail sector

The Pago Retail Report 2008 underlined the encouraging fact that the overall chargeback ratio in European online purchasing remained very low, at 0.34%. A look at the reasons for chargebacks reveals an important difference between retailing and overall e-commerce (which is analysed in detail in the Pago Report 2008). In retailing, one out of five chargebacks (just below 20%) is the result of "unclear transactions", in contrast to only 8.57% in overall e-commerce. This reason of rejection might be avoided easily, for example by executing the order in a timely fashion and clearly stating the recipient of the payment - the online merchant - in the debit statement. This is a point where online merchants themselves have to do better - and in addition, they should educate their customers better about how they can avoid data entry mistakes.

Use of 3-D Secure reduces chargeback ratio

By using 3-D Secure European retailers can reduce their credit-card-related chargeback ratio, i.e. the risk of non-payment, to 0.24%. In other words: Only one out of 400 purchases paid for by credit card or Maestro fails. The 3-D Secure technology allows online merchants to protect themselves against misuse of credit cards and against wrongly entered credit card numbers. The procedure consists of the authentication stage and the actual credit card transaction. During the authentication stage the identity of the cardholder is verified by the card issuer's checking the cardholder's password, so potential fraudsters will fail to identify themselves correctly. Even though 3-D Secure is not yet offered by all banks, using it makes sense for merchants. If the procedure is used, it is no longer possible to insist on chargebacks by arguing that the cardholder has not initiated the transaction. And merchants will not be exposed to this risk either if they want to use 3-D Secure, but an authentication is impossible because the cardholder or the cardholder's bank do not support the system. It should be noted that 3-D Secure is obligatory for Maestro transactions, but voluntary for credit cards.

Lower chargeback ratio for consumers from outside Europe than in the year before The favourable overall development in chargeback ratios is particularly evident among consumers who, in the Pago Retail Report 2008 categorisation, come from the "rest of Europe". This term covers European customers who are not living in the e-commerce strongholds Germany and UK. In the rest of Europe the comparatively high chargeback ratio registered in the year before (1.03%) fell to a favourable 0.19%. The chargeback ratio is lowest for German customers, at only 0.08%.

Pago Retail Report 2008 an expansion of the Pago Report 2008

The Pago Retail Report 2008 differentiates between customers from Germany, the UK, the rest of Europe and regions outside Europe. In contrast, all merchants are domiciled in European countries - a logical restriction in that this is Deutsche Card Services' licensing area. Evaluations of new payment methods such as giropay and Maestro are particularly important at the European level, and the Pago Retail Report 2008 gives them for the first time ever. The analysis only covers online merchants which offer goods, i.e. whose business is similar to traditional mail-order retailing. Thus the Pago Retail Report 2008 supplements the Pago Report 2008, which deals with e-commerce as a whole.

The Pago Retail Report 2008, which is entitled "Purchasing and Payment Behaviour in Online Retail", gives numerous evaluations of European trends in purchasing and payment behaviour and non-payment risks and explains developments in retailing, one of the most important e-commerce sectors. This covers online shops which offer goods, i.e. pursue a similar business model as traditional mail-order business - a sector which should have blossomed in the Christmas shopping spree lately. The database consists of about seven and a half million retail transactions settled via the Pago platform between October 2006 and September 2007.

The Pago Retail Report 2008 is available at a price of EUR 250 (excl. VAT). For more information please see .

Source: Company press release.

Payment Behavior
  • The credit card remained the dominant payment method in European e-commerce
  • Brand shares of Visa and MasterCard have remained almost unchanged
  • Maestro, the new payment method, has already taken a 4% share of the payment market
  • giropay, the new payment method in Germany, reached a market share of 2.38%
  • Credit card payment is becoming more important for German consumers, too
  • Already almost one in ten transactions in the UK are made using Maestro, the new online payment method
  • Highest transaction values were generally paid for by credit card
  • In Europe overall, MasterCard transactions recorded higher average transaction values than Visa
  • Visa and MasterCard continue to dominate the European e-commerce market
  • Other credit card brands are insignificant (exception: Germany)
  • Higher average transaction value with MasterCard
  • Visa has taken almost 7 percentage points of market share from MasterCard amongst male consumers
  • German women are conservative with regard to payment behaviour, still preferring to pay by direct debit
  • German males, on the other hand, use credit card payment in as many transactions as when paying by direct debit

    on-Payment Risk

    Lower chargeback ratios with Maestro than with credit card payments
    Transactions using 3-D Secure record considerably lower Chargeback ratios but also lower success rates
    Chargeback ratios for credit card transactions are still at a very low level
    Chargeback ratio has fallen mainly because of improvement for consumers from UK and Non-Europeans
    Large proportion of chargebacks seem to be due to attempted consumer fraud
    Overall European success rate has risen to 77%
    Declining trend in rejected payment attempts using blocked cards and attempted manipulation
    Increase in proportion of transactions rejected by credit card issuers
    Chargeback ratio for direct debits is ten times as high as for credit cards
    Chargeback ratio in UK shops higher than in German shops
    Highest chargeback ratio recorded for purchases made by Non-Europeanconsumers
    Highest chargeback ratio recorded in the transaction value category of between 100 Euro and 500 Euro (previous year: over 500 Euro)
    No significant difference in chargeback ratios between Visa and MasterCard brands
    Both chargeback and success rates are higher for females than for male consumers (exception: German chargeback ratios)

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E-Commerce Takes Toll on Home Depot

Large hardware stores have capitalized upon th...Image via Wikipedia

Home Depot Posts $54M Loss, Facing E-Commerce Competition

HomeDepot posted their first quarterly loss in over 25 years as competitionfrom smaller e-commerce firms like Exterior Solutions heated. HomeDepot expects sales to decline 9% this year, while smaller Internetrivals anticipate revenue increases.

St. Charles, Illinois (PRWEB)March 14, 2009 -- Home Depot posted a $54M dollar loss during thefourth quarter and said that they expect sales to decline 9% during theyear, despite e-retailers revenue increases. "We are anticipating atough year", said Home Depot CEO Frank Blake, while online nicheretailers such as Exterior Solutions are experiencing rapid revenuegrowth.

Exterior Solutions specializes in exterior vinyl shutters, wood shutters, vinyl window headers, sunbursts, and other siding accessories.

One of Exterior Solution's fulfillment centers in Illinois in mid-February.
One of Exterior Solution's fulfillment centers in Illinois in mid-February.

Exterior Solutions recently revamped their e-commerce website to expandtheir product line and make their site easier to use. The MarketingManager at the company, Ken Clark, said "We wanted to take the sitefrom a place where people come just to transact to a site that promotesbrand loyalty".
Although Exterior Solutions is much smaller than box retailers likeHome Depot they are still able to compete in some areas. The Internetretailer offers customers customized products that would not typicallybe available at stores like Home Depot. There simply isn't enough shelfspace in a brick and mortar store. For example, Home Depot stocksexterior vinyl shutters in three or four colors and just a hand full ofsizes. Exterior Solutions offers vinyl shutters in 23 colors and anycustom size.
We are anticipating a tough year

Prices at e-retailers are often more competitive than box stores due tosales tax laws, reduced overhead at internet stores, and free shippingpolicies offered by many e-commerce stores.

Our customers are pleased said Clark. "Thank you so much for theexcellent service. My husband and I were very impressed with thequality of our shutters and the professional service we received," saidCarrie from San Diego, CA.

For additional information on the news that is the subject of thisrelease (or for a sample, copy or demo), contact Ken Clark or visit

About Exterior Solutions:
Exterior Solutions is an innovative specialty electronic retailingcompany who supplies residential building products that improve thequality and performance of homes to the building, contracting, andconsumer markets. These products include exterior shutters, sunbursts& ellipticals, window headers, door surrounds, and accessories.Exterior Solution's industry leading technologies enhance the qualityof consumer experience and add value to our services, while alsoreducing our impact on the environment.

Ken Clark, Marketing Manager
Exterior Solutions

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New "Breach Driven" Compliance Rules for HIPAA

Newly Enacted HIPAA Security Breach Notification Requirements Raise New Risks For Employers

Employershave good reason to re-evaluate their HIPAA compliance efforts. Recentenforcement actions by the U.S. Department of Health and Human Services(HHS) that resulted in large settlement payments signal more pronouncedefforts to enforce HIPAA’s compliance requirements. These enforcementactions were driven by publicly disclosed security breaches thatbrought compliance lapses to HHS’ attention.

Recent amendments to the HIPAA Privacy Rule, enacted as part of themassive federal economic stimulus legislation, will fuel this“breach-driven enforcement.” Under existing law, the HIPAA Privacy Rulecontains no security breach notification requirement. EffectiveFebruary 17, 2010, however, employers will be required to take thefollowing steps when they learn that the “unsecured” protected healthinformation (PHI) of participants in HIPAA-covered plans has beensubjected to unauthorized access, use or disclosure:

• Notify major media outlets and HHS if a breach involves 500 or more plan participants
• Notify affected individuals within 60 days of becoming aware of the breach
• Provide in the notice to individuals, at a minimum, five specific categories of information
• Deliver the notice by first-class mail to each affected individual’s last known address

This notice obligation applies regardless of whether the employer ora third-party service provider, such as a benefits administrator,pharmacy benefits manager, or insurance broker is responsible for thebreach.

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