Chain Store Age, June 24, 2013
By Mohammad Hashemi
In the last decade, online transactions have matured from an e-commerce curiosity into the bedrock of selling goods and services online. Whether you are exclusively an e-commerce retailer or a hybrid brick-and-mortar retailer with a web presence, online payments today are a pervasive and critical sales driver.
Despite widespread retail industry adoption of online payment platforms, the technology in some ways remains in its infancy. Entrenched payments vendors often require consumers to have a bank account and a debit card, which effectively ensures that retailers cannot sell into many emerging geographic markets, nor can they reach a rapidly growing unbanked and underbanked population. One might argue that traditional payment platforms are hindering a common purpose of the commercial Internet: to market to as broad an audience as possible.
To fill the gap, dozens of providers of “e-wallet” technology have emerged in recent years. These e-wallets store a user’s money electronically for the purpose of performing online money transactions. In some cases, e-wallet-to-e-wallet transactions have become the preferred method of payment for both online merchants and their consumers because of the protection an e-wallet offers. Consumers’ financial information is never shared or stored on merchant websites; and online merchants appreciate the value-added benefits of fraud prevention, chargeback management and dispute resolution that e-wallets can provide.
Many retailers are in the evaluation stage with e-wallet technology, perhaps looking to augment a primary payments platform with an e-wallet option. With ecommerce sales set to pass the one-trillion-dollar mark by the end of this year, e-wallet providers are eager for your business. Price comparison is always important, of course, but here are five things all retailers should ask themselves in addition before moving forward with e-wallet technology:
1. Does it have a global footprint? It is important to select an e-wallet that operates in the countries you serve today, and the countries you would like to serve tomorrow. Should the time come when you want to expand your reach into South America, for example, your e-wallet should already have payment options in place to suit the needs of your business and the payment preferences of your potential customers. In order to support a global customer base, an e-wallet must be able to support different payments systems: while credit card is the payment preference of choice in the U.S., in Germany, instant banking options are responsible for the majority of online purchases.
2. Does it offer traditional and emerging payment options? Even if you have no plans to expand your business outside of a highly industrialized market such as North America, you should still look to e-wallets that are able to support both banked consumers and those traditionally under-serviced, such as those with poor or no credit. The financial landscape in once stable markets has shifted to expose new opportunities, such as prepaid debit cards as an option for those unable to utilize traditional banking services. The birth of new technologies has also contributed to the emergence of new market opportunities, such as mobile payments. The more payment options that an e-wallet can support, the more customers you can reach.
3. Does it handle all security, regulatory and compliance requirements? E-wallets must adhere to all legal, regulatory and card association rules in order to properly protect your customers’ personal and financial information, and subsequently instill consumer confidence while lowering your shopping cart abandonment rate. According to poll by the National Cyber Security Alliance, security concerns were responsible for 63% of online shoppers not completing a purchase. Making sure that your e-wallet provider complies with industry standards (such as defined by the Payment Card Industry’s regulations on storing and transmitting credit card information) and specific regional legislation (such as FinCEN’s IT Modernization Program which provides a foundation for how financial service providers collect, store, safeguard and share data) will reinforce your customer’s confidence in transacting with your brand.
4. Does it protect you and your customers against fraud? E-wallets should do more than just ensure transactions are sent and received accurately. First and foremost, your e-wallet provider should deter fraudsters from even attempting to penetrate your business. Should fraudsters sneak in, your e-wallet must be able to quickly sort the fraudulent transactions from the legitimate ones, and it must have an equally robust and balanced fraud management system in place. The processes and mechanisms an e-wallet employs to identify fraud, however, can be an obstacle for your customer: an overly lenient set of mechanisms will allow too many fraudulent transactions to occur, while an overly stringent set of mechanisms may frustrate and potentially drive away customers. Identify what level of protection is right for your business and your customers, and choose an e-wallet that maintains this balance.
5. Does it focus on the customer experience? Don’t give customers any reason for falling into the 66% of online shoppers who walk away from a purchase. Providing a smooth customer experience lowers shopping cart abandonment rate. Keep in mind that, even though the payment portion of a transaction is out of your direct control and in the hands of an e-wallet provider, your customer’s payment experience is included in your customer’s overall interaction with your business. An e-wallet that is easy for your customers to use and that provides a high level of customer support will be regarded by your customer as an extension of your business. A positive experience is more likely to create a loyal customer.
The almost ubiquitous availability of Internet access and the exponential growth in mobile phone browsing have brought perpetual connectivity to much of the world. Now, more people from more countries have the opportunity and the ability to interact with your business online, and understanding the intersection of your ecommerce goals and the emerging e-wallet landscape are key to determining how far and wide your business will grow.
Mohammad Hashemi is VP of strategy at Payza, a global online payment platform with headquarters in London.