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 www.ecommerce-report.de .
Source: Company press release.
- 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
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)