Global Collect Winning Payment Strategies for BRIC Part1

Payment strategies in BRIC

Presented by:John SnoekJohn.snoek@globalcollect.comProduct Manager

GlobalCollect

BRIC Webinar Program

• BRIC program

• Helicopter view

• In-depth per country in next webinars

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Why?

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Source: CIA – The World Factbook | Internetworldstats.com

Country PopulationGDP/capita

(USD)Growth (%)

Internet

Users

203 Mio 10,900 7.5% 76 Mio

139 Mio 15,900 3.8% 60 Mio

1,189 Mio 3,400 8.3% 81 Mio

1,337 Mio 7,400 10.3% 457 Mio

Why?

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Why?

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E-commerce growth

2008 2009 2009 2010

Brazil 39% 40%

Russia 28% 35-38%

India 30% 50%

China 39% 38-45%

Brazil Russia India China

6,24,9 2,3

36,4

8,96,7

3,5

51,0

E-commerce volume in Billion USD

2009

2010

Central themes

BRIC: Appealing but challenging

Local alternatives up to 30%

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Framework

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Similarities

• Relatively closed economies | High E-com growth

• Government/central banks dominant

• E-com infrastructure less advanced

• E-com barriers (e.g. legal, repatriation)

• Higher fraud & chargeback rates (BRI)

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Differences

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Country Overall score ConnectivityBusiness

environmentSocial and

culturalLegal

environmentGovernment

policy and visionCons. & Bus.

Adoption

Brazil 5.27 3.60 6.66 5.73 6.10 5.70 4.93

China 4.28 2.65 6.36 5.40 5.20 4.60 3.11

India 4.11 2.15 6.27 4.67 5.60 5.10 2.88

Russia 3.97 3.85 5.72 5.13 3.65 3.00 3.01

USA 8.41 7.35 7.85 9.00 8.70 9.25 8.60

E-readiness (EIU - 2010)

Country GDP/capita (USD) Debt % Savings Credit cards Debit cards Inhabitants cc/capita dc/capita

Brazil 10,900 35% 17% 191 233 194 0.98 1.20

Russia 15,900 13% 26% 10 119 141 0.07 0.84

India 3,400 12% 24% 24 130 1189 0.02 0.11

China 7,400 17% 47% 199 1800 1337 0.14 1.29

US 46,400 136% 7% 686 488 310 2.21 1.57

Sources: creditcards.com | CIA factbook |

Debt vs. savings

The playing field

Setting up shop

1. Conversion Alternative payment

2. Local collection Resident bank account

3. Entity Admin and operational cost

4. Type of entity determines how to repatriate and how it is taxed• Local regulation of various industries (e.g. telco, travel)

5. Logistics

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The playing field

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Taxes and repatriation

• Tangible or intangible?

• Customer = consumer or business?

• VAT and withholding tax!

Capture relevant data in checkout process

Frequency of reporting and FX trade-offOperational impact + currency exposure vs. cash flow

Brazil

“Craving for credit”

Brazil – The payers

• Installments (“parcelas”)

• Not everyone has a card or gets credit

• Cash or cards

• Relatively high # of chargebacks

Country GDP/capita (USD) Debt % Savings Credit cards Debit cards Inhabitants cc/capita dc/capita

Brazil 10.900 35% 17% 191 233 194 0,98 1,20

Brazil – The players

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Cards Banks Alternatives

Brazil – The players

The star• Boletos – Bank scheme

– push payment using barcode

(via online banking, bank branch, check or ATM)

– No consumer charge

The contenders• Mercadopago & Dineromail

Continuous high growth in last 3 years

– Various funding sources

• Débito Online

– Real-time banking

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Cards60%

Boletos30%

Bank transfer

5%Others

5%

Market share online payment methods

Brazil – Pick your team

Digital Physical Travel

Cards +++ +++ +++

Boletos ++ ++ +/―

eWallets ++ ++ ++

Bank transfer + + ++

Mobile + ― ―

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Payment methods

Reversible? Moneyback refund Recurring

Boletos No (except when paid by check) No No

eWallets No Yes No (being developed)

Bank transfer No Yes No

Mobile Yes Depends on carrier Depends on carrier

Brazil – The gameplan

• Local BT + eWallets + Boletos = avg. of 25-35%

• Your industry requirements (tax!)

• Local entity | Capturing consumer data

• Use third party for FX and repatriation

– BRL cannot be repatriated

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RussiaCards are the alternative

MRC 2010 Semi-Annual Platinum Meeting and 10th Anniversary Celebration

Austin, TX | October 1

Russia – The payers

• Cash lovers – Distrusting banks (1998)

• Prefer eWallets for online as cash substitute

• Majority online purchases = digital

• Travel up 500%

• Many cards not enabled for online

• Cross-border payments growing

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Russia – The players

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Cards Banks Alternatives

Russia – The players

The stars• Yandex (eWallet)

– #1 FOP | RUB only

• Webmoney (eWallet)– #2 FOP | Multiple currencies

(Webmoney Gold)

The contender• Qiwi (ATM cash-in/eWallet)

– Largest network of ATM‟s

– 80 Million users a month

– Funding source for eWallets, VISA prepaid or direct payment 21

70%

10% 12%8%

45%38%

10% 7%

Cash on

delivery

E-money Credit card Bank transfer

2008 2009

Which online payment method do you prefer?

Source: Romir – 2009

Russia – Pick your team

Digital Physical Travel

Yandex +++ +/― +/―

Webmoney +++ +/― +/―

Qiwi ++ ― ― ―

Cards + + ++

Mobile +++ ― ―

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• Preferred payment methods

Reversible? Moneyback refund Recurring

Yandex No No Yes

Webmoney No Yes (time limit) Yes

Qiwi No Yes (to wallet) No

Mobile Yes Depends on carrier Depends on carrier

Russia – The gameplan

• Yandex , Webmoney & Qiwi = average increment of 40-50%– For ATV < USD 500

– Travel = cards | Physical goods ► „see first then pay‟

• Setup local entity + tax passport

• Non-resident is possible, but:– Settlement up to 30 days

– Not all local vendors/acquirers

• Use third party for FX and repatriation– RUB cannot be repatriated

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India

“Waiting for the giant to awake”

India – The payers

• Online buyers situated

in metropolitan areas

• 85% shoppers aged 15 – 352015: 65% of population aged 15 - 35

• Mobile penetration (600 Mio vs. 81 Mio Desktop)

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India consumer trends research: Mint in cooperation with Komli

Media - 2009

Source: IAMAI: “Digital Commerce” – March 2011

India – The playing field

• Logistics

• Two-factor authentication for CNP

• Success rates declined

• Since Feb 2011 also for mobile/IVR transactions

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India – The players

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Source: IAMAI: “Digital Commerce” – March 2011

(Base: 7.5 million Active Internet Users who have made online purchases)

Cards24,5%

Net banking43,8%

Cash cards16,9%

Other14,8%

Market shares - IRCTC

India – The players

Reserve Bank of India (RBI)

The star• Indian banks via net banking

– ICICI, SBI, HDFC

The contender• Mobile (Obopay, Paymate, mChek)

– carrier billing, linking card or bank account

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Source: IRCTC (Indian Railway) –accounts for 25-30% of online payments in India

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India – Pick your team

Digital Physical Travel

Cards ++ +++ +++

Netbanking +++ +++ +++

Cash cards ++ ― ― ―

Mobile +++ + +

Reversible Moneyback

(refund)

Recurring

Netbanking Yes Yes Yes

Cash cards No Yes No

Mobile Yes Depends on

carrier

Depends on

carrier

India – The gameplan

• Net banking, Cash cards and mobile = average increment 20%

• Mobile?

• Local entity (Direct connections or via PSP)

• Trust ► Checkout pages IRCTC (trusted)

• Use third party for FX and repatriation– INR repatriation very limited

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China

Growing to the top

China – The payers

• Cash (COD) first and foremost

• < 35 more prone to credit and

buying online

• Group shopping (19M users)

• Transaction limits per consumer

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Source: CNNIC “ Statistical Report on Internet Development in China “ | July 2010

94

128

0

20

40

60

80

100

120

140

Millio

ns

# of shoppers paying online

December 2009 June 2010

China – The players

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Cards Banks Alternatives

China – The players

The stars

• China Union Pay (CUP)

• Alipay

The contenders• Tenpay (part of Tencent)

• Mobile (202% YoY)

303 M mobile internet users

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China – Pick your team

Digital Physical Travel

Cards +++ +++ +++

Alipay +++ ++ ++

Tenpay ++ ++ ++

Mobile +++ ― ―

Bank transfer + + +

Reversible Moneyback

(refund)

Recurring

Alipay No Yes (not realtime) No

Tenpay No Yes No

Mobile Yes Carrier dependent Carrier dependent

Bank transfer No Yes No

China – The gameplan

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• Alipay & Tenpay ► average increment of 30-40%

• Mobile?

• CNY repatriation not possible

– Setting up entity in China cumbersome

• Taxes approximately 30%

Summary

Summary

• Markets and product functionality less mature

• Seek local tax and legal advice

• Adapt checkout process capture necessary data

• Reporting requirements

• Website in local languages & customs

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Summary

vs.

Match your business with FOPs that support your needs

(e.g. pricing, refunds, recurring, delayed settlement)

Trust, transparency and clarity39

Watch this space

Next Webinars

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http://www.youtube.com/watch?v=lp8d0Pb6UY0

“Brazil in-depth”By Daniel Belda

Product Manager

GlobalCollect

“Gaming in BRIC”To be announced next

week

Perseverance

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http://www.youtube.com/watch?v=lp8d0Pb6UY0

http://www.youtube.com/watch?v=lp8d0Pb6UY0