1. Cross Border E-commerce: Challenges and Opportunities
Howard Bell,
Head of Online Payments, Barclaycard
Internet Retailing ‘Payments & Fraud’
11th February 2010

2. Challenges and Opportunities
european eCommerce trends
market opportunities and challenges for retailers
beating fraud
Cross Border eCommerce Feb 11th 2010

3. European e-commerce: online retail sales
In EU markets, where internet penetration is low, e-commerce is growing rapidly …..
European e-commerce: online retail sales
(Source: Forrester)
€ millions
Source: Forrester Research 2008
Cross Border eCommerce Feb 11th 2010

4. The European E-commerce Landscape
The Headlines
The European eCommerce payments market is worth €230 billion; €95 billion from the UK
Visa and MasterCard are top 2 EU payment methods; PayPal is 3rd
There are approximately 500,000 e-commerce merchants across the EU – and 1/3 of these are internet only stores
France, Spain and Italy are the fastest growing markets but currently have low internet penetration
PCI DSS is a Global (and hence pan-European) requirement
Increasingly Tier 2 EU merchants are seeking a hosted paypage (acquiring and gateway combined)
Source: Barclaycard Proprietary Research, 2010
Global Payment Acceptance Barclaycard SmartPay – EU Marketing & Roll-out –
Cross Border eCommerce Feb 11th 2010

5. European shoppers expect choice
Simple payments?
“Which payment method (s) do you prefer when you buy products online?*”
Credit card
40%
60%
35%
26%
51%
51%
19%
34%
Electronic bank transfer
26% 3% 3%
56%
20%
14%
43%
43%
Debit/payment card
24%
43%
57% 3%
14%
10%
14%
17%
PayPal
23%
35%
16%
22%
14%
26%
11%
11%
Cheque/accept giro
19% 5%
17%
31% 2%
19%
37%
13%
Cash
10% 3% 3%
10%
32%
19%
16%
24%
Maestro/Solo UK
Carte Bleue FR
ELV DE
iDEAL NL
Source: Forrester Research Inc
* Forrester allowed Consumers to select preferred methods and allowed multiple votes (hence totals>100%)
Cross Border eCommerce Feb 11th 2010

6. Opportunities are real; challenges need active management
New Markets
New Payment Streams
New Shoppers
PCI DSS
Fraud & Chargebacks
New Payment Methods
Tesco.com. Amazon, Asos recently recorded 20% profit growth
Cross Border eCommerce Feb 11th 2010

7. International CNP Fraud*
International CNP fraud, Nov 2009
Headlines
Decline in CNP Fraud (-13%) vs 2008
CNP Fraud still 60% of total fraud
Top 5 buyer countries are US, Spain, Ireland, Cyprus and France
Mix skewed towards Credit but Debit increasing
(Credit 48% , Debit 40% , Charge 12%)
* as at Nov 2009
Cross Border eCommerce Feb 11th 2010

8. Barclaycard’s Approach to Beating Online Fraud
Industry-Leading Performance–losses 40% lower than UK average
Robust vetting and advanced risk analytics
Partnership approach with customers
Active collaboration with card schemes to identify & block fraudulent buyers
Leading Influence over Risk Policy e.g. PCI DSS
New Propositions
“Fraud Reporter” – online daily file (PGP) to prevent dispatch to fraudsters
Cross Border eCommerce Feb 11th 2010

9. your questions?
Confidential

10. What is Payment Card Fraud?
Involves the use of a credit/debit card without the consent of the genuine cardholder
or the account itself has been set up fraudulently.
Fraud types include:
CNP Fraud – merchant, retailer or service provider has no physical access to payment card.
e.g. Internet / Mail Order / Telephone / Fax
Counterfeit Fraud (cloned / skimmed) – A plastic card that has been printed, embossed or encoded so as to purport to be a genuine payment card issued with the authority of the genuine issuer
Identity Theft / Fraud – Where someone uses your personal information such as name, payment card number or other identifying information without your permission to commit fraud or other crimes
Mail Interception / Social Engineering / Phishing / Malware Attacks / Raiding Bins
Other Fraud Types – Lost & Stolen / Non Receipt of Mail / Application Fraud
Cross Border eCommerce Feb 11th 2010

11. What is acquiring fraud?
Collusive
1st Party Fraud by BPA Retailer
Fraud Occurs
at Retailer
Genuine
3rd Party Fraud at BPA Retailer
Chargeback right..
Shopper has rights
Issuer has no chargeback right
Where cardholder authentication exists - Chip & PIN or 3DS)
Issuer Chargeback
right exists
CNP / No 3DS
Card Present - No supporting evidence, signatures etc
Shopper has rights
Issuer has no chargeback right
Where cardholder authentication exists - Chip & PIN or 3DS
Issuer Chargeback
right exists
CNP / No 3DS
Card Present - No supporting evidence, signatures, verification etc
Loss..
Fraudulent funds recovered as a result of freezing bank accounts & diverting pdq
Acquirer loss.
No loss to BPA or retailer
Issuer Loss
Retailer loss
Loss to BPA = Retailer
unable to pay chargebacks
Fraud Debt owed to BPA. Resulting from fraud activity at the retailer.
Cross Border eCommerce Feb 11th 2010

12. Customer Recruitment – Best Practice
Online customer additional information – Best practice
Customer service number
address to contact company
Statement on risk & fraud controls
Delivery methods & timings
Age verification methodology (age restricted goods & services)
Refund & returns policies
Privacy statements (permissible uses of customer information)
Depending on the type of customer, perhaps a terms of service and / or acceptable use policy
Cross Border eCommerce Feb 11th 2010

13. Customer Recruitment – Best Practice
Trading information
Nature of goods & services
Design of home page & location of billing pages
Price patterns
Merchant location (Physical & Legal)
Ave or projected turnover
Ave or projected refund volume & refund policy
Ave or projected chargeback or fraud rates
Disclosure of all payment mechanisms offered
Disclosure of all sales channels inc all URL’s or referral sites
Check validity of telephone numbers / addresses / listed [personal & other contact information
Cross Border eCommerce Feb 11th 2010