Presentation on theme: "Direct Response Forum – Basel, 25./"— Presentation transcript:
1 Direct Response Forum – Basel, 25./26.04.2006 Case Study: Direct DebitSven Krahn
2 Lycos is one of the leading European portals. Introduction to LycosLycos is one of the leading European portals.Top 5Top 10OtherResults from a Roland Berger Ranking of Top-BrandsSource: Manager Magazin Online 2002Rank 1Coca ColaLycosRank 32T-OnlineRank 42MSNRank 77AmazonRank 83MarlboroRank 94BMWRank 115
3 International business Introduction to LycosInternational businessbank-/post-/ autogirotT-Pay4B MasterCard Debit4B Maestro DebitVisa Electrón DebitPremium SMSPremium Rate Numbers
4 Challenges for LycosMulti-Service Billing (for all the different Lycos Premium Services)Integration (bring all the different bills on one invoice)Service bundles, packages (apply price and discount plans to a set of services)Flexible pricing (transparency and visibility to user AND product manager)
5 Challenges and requirements Integration means to bring the charges for all premium services to one consumer invoice.
6 We require core competency within each module. Lycos Core Billing PlatformWe require core competency within each module.3. Customer CareT-PayAccount receivables, debtor management4. Payment processingusage/ordersCore BillingPlatformcustomer datainvoices1. Premium ServicessignupCDBLycos Sign Up2. Sign up and customer database
7 Germany and Netherlands are direct debit countries Importancy of Direct DebitGermany and Netherlands are direct debit countriesOffline bank transfers are fully substituted by Direct debit.Target group has no credit cards.
8 Pros and Cons of Direct Debit CustomerMerchantVery common for all types of recurring payments (utilities, subscriptions, membership fees, …)Secure and simpleCustomer-friendly chargeback policies100% coverage (Everybody has a bank account)Control of the payment dateFast (payment notification after 2-4 days)Low costs (per transaction fee)ProsCustomers need to control debits on their accountsSome countries require very complex mandate handling (fulfillment) proceduresHigh chargeback riskLong revocation periodsEasy to fraudCons
9 Germany is an ‘easy’ Direct Debit country The ‘mandate issue’Germany is an ‘easy’ Direct Debit countryPre-authorized direct debitThe payer (debtor) pre-authorize the debit of his account on the initiative of the beneficiary (creditor)Legal framework between five parties:Creditor and creditor‘s bankDebtor and debtor‘s bankclearing house or payment supplier (optional)The different systems operate on basis of three contracts:agreement between all participating banksagreement between debtor and creditor mandateagreement between creditor and his/her bankNon pre-authorised direct debitNo mandate before the direct debit process actually occursThe creditor has to present the collection instruction to the debtor as a request for authorizationAfter authorization by thedebtor, the debtor’s bank will execute the direct debitPossible revocation period of 6 weeks for the consumer without stating a reason
10 Bank information is ‘public knowledge’ Algorithms check are available from the Federal Bank of GermanyValid sort codes (Bankleitzahlen) are available as wellFor fraudsters, it is easy to get “real” bank information that will pass any of the algorithm checksFor customers it is very easy to make a chargebackInternet Merchants need additional customer validation, e.g.PIN (SMS or bank statement)phone validationaddress verificationinitial active fund transfer by customer (prior to direct debit)
11 Direct debit is a MUST for Lycos Europe Summary and conclusionDirect debit is a MUST for Lycos EuropeDirect debit is perceived as the most consumer-friendly and “secure” payment method in DE and NL.Direct debit (DE and NL only) makes 30% of all our European payment methods.Direct debit ranks up to 85% in DE and NL.Relevant parts of our target groups do not own a credit card (credit cards are not common in Germany)Other countries (besides DE and NL) have too complex requirements and/or direct debit is not so popular