Online Consumer Payments

Content

• Overview
• Catalyst
• Summary
  • Table of figures
  • Table of tables
• Introduction
  • WHAT IS THIS REPORT ABOUT?
  • Who is the target reader?
  • Scope of the report
  • Datamonitor's definition of an online consumer payment
  • Trends in Online Consumer Payments
• Introduction
• Key Findings
  • Growth in the number of internet users has been impressive, the majority of whom shop online
  • The number of internet users has been growing rapidly and accounts for 16.9% of the total world population
  • The majority of global internet users are in Asia Pacific
  • However, the highest penetration of internet users is in North America
  • The availability of broadband has contributed to this rapid growth
  • The vast majority of global internet users made a purchase online
  • North America and Europe enjoy the highest penetration levels of consumers who shop online
  • Online consumer payment volumes continue growing rapidly on both sides of the Atlantic
  • Online commerce has been growing rapidly in Europe and the US
  • Germany, the UK and France are the largest online markets in Europe
  • Consumers in Europe and the US are spending increasingly more online than they did several years ago
  • The online consumer spending in Europe is estimated to triple by 2010
  • Germany is forecast to be the largest market for online commerce
  • Online commerce is growing in Asia Pacific, where Chinese consumers spent €25.4 billion online in 2006
  • The relative importance of the retail sector to the service-related industry may vary across markets
  • Online retail spending accounts for a small but a growing share of total retail sales
  • Books and holiday-related items are the most popular items bought online across the globe
  • The credit card is the most frequently used payment method online, while PayPal and prepaid cards are becoming more widespread
  • Debit cards are not widely used for online payments
  • PayPal is growing rapidly and is among the top five payment methods online
  • Prepaid cards are least commonly used but are becoming more widespread
  • over half of European retailers have a website but fewer accept payments online
  • 55% of firms in Europe have a website
  • However, only one in four businesses use the internet as a sales channel
  • The majority of merchants in Europe receive between 5% and 25% of their total orders online
  • Realizing the Online Payment Opportunity
• Introduction
• Key Findings
  • Measures to tackle fraud have achieved the primary aim but have reduced ease of use
  • Fear of online fraud deters one in eight EU adults from online commerce
  • The industry has responded with a number of initiatives to improve CNP security
  • The number of subscribers to 3D Secure initiatives is growing
  • Card readers have the potential to be introduced in online commerce
  • Failure to innovate effectively has left tightening security as the only option for issuers
  • Virtual card numbers have been tried by several players, but with only limited success
  • The development of 3D Secure restricted the use of virtual cards
  • Virtual prepaid cards aim to meet the needs of the unbanked and wary consumers, but are niche at best
  • Visa 3V card: a unique prepaid card program with virtual applications
  • eWallets have also emerged as an online payment tool, but fortunes have also largely failed
  • Microsoft, Egg, and Securicor all tried but failed in this space
  • past failure to meet the needs of consumers will cost the industry dear without innovation
  • The growth of auction websites created a payment market the card industry did not serve
  • The gap in the market was filled by PayPal, now the leading non-card online payment tool
  • PayPal has developed the global reach of its service rapidly since the eBay acquisition
  • PayPal's transaction volumes are the same scale as the payment card markets in Austria and Denmark
  • PayPal's fraud losses are also extremely low
  • PayPal's success has seen other non-bank players look to create online payment platforms
  • Yahoo launched PayDirect in 2000, but left the market in 2005
  • Google launched Google Checkout in 2006 to target the B2C market
  • Amazon tested a web payments service in 2007
  • These players are now a genuine threat to existing card issuers in the B2C payment space
  • PayPal is already established in the B2C payment space and has attracted merchants of all sizes
  • Google and Amazon explicitly target B2C and have aggressively priced their offerings to attract merchants
  • Indeed, PayPal now has credit and debit cards issued under its brand and has launched a mobile service
  • Branded credit and debit cards are a significant step towards competing in the wider banking space
  • The launch of a mobile payment service is a further development into the B2C space
  • to protect future revenues from online payments, the industry must innovate
  • Better integrating 3D Secure into payment processes would increase take-up
  • Developing more co-brand and loyalty offerings in the online space would grow card use online
  • A scheme driven online payment service could leverage the reputation of the payment industry
  • Moving to a system built around credit transfer, rather than cards, is worth considering
• Appendix
  • Supplementary data
  • Definitions
  • B2B
  • B2C
  • Credit card
  • Commercial card
  • Debit card
  • ePurse
  • eWallet
  • Macro payment
  • Micropayment
  • Mobile payment
  • P2P
  • PDA
  • PIN
  • Prepaid card
  • This is a card that cardholders can load up and then only spend the amount that is loaded on the card. Some prepaid cards can be reloaded, while others can be used only once. There are different types of prepaid card, ranging from ePurses to gift cards to travel cards
  • Reverse billing
  • Smart card
  • SMS
  • Methodology
  • Further reading
  • Ask the analyst
  • Datamonitor consulting
  • Disclaimer
• List of Tables
  • Table 1: The US has the largest number of internet users globally, 2006
  • Table 2: Broadband subscribers in Europe and the US, 2006
  • Table 3: Online commerce in Europe and the US forecast to 2010, 2001-10f
  • Table 4: Online commerce in Europe and the US forecast to 2010, 2001-10f
  • Table 5: Electrical goods, food and groceries and clothing and footwear are the most popular among online shoppers in the UK, 2001-06
  • Table 6: 55% of firms in Europe have a website, 2006
  • Table 7: The Czech Republic and the UK have the largest number of firms that have a website, 2006
  • Table 8: One in eight adults do not shop over the Internet due to fear of fraud, 2007
  • Table 9: Fees and limits for the 3V Visa prepaid vouchers, 2008
  • Table 10: eBay facts and figures, 2002-06
  • Table 11: PayPal facts and figures, 2007
  • Table 12: PayPal's number of accounts, transactions and value of transactions globally, 2003-07
  • Table 13: Internet users segmented by region, 2002-06
  • Table 14: World population segmented by region, 2002-06
  • Table 15: Broadband subscribers globally forecast to 2011, 2002-11f
  • Table 16: Spend per internet user in Europe and the US, 2002 and 2006
  • Table 17: Internet users in Europe and the US, 2002 and 2006
  • Table 18: Online consumer spending in the US segmented by retail and services sectors, 2001-05
  • Table 19: Online consumer spending in the UK segmented by retail and services sector, 2001-06
  • Table 20: Online retail consumer spending in the UK and the US, 2001-05
  • Table 21: The share of online spending by retail sector by UK consumers, 2001-06
  • Table 22: Percentage of European firms receiving a certain proportion of their orders online, 2006
  • Table 23: Current relevant Datamonitor publications, 2008
  • Table 24: Future relevant Datamonitor publications, 2008
• List of Figures
  • Figure 1: The number of internet users has grown by 20.2% over 2002-06
  • Figure 2: 40% of global internet users are in Asia Pacific, 2006
  • Figure 3: North America has the highest penetration of internet users, 2006
  • Figure 4: Broadband users are forecast to grow by 51.7% over 2007-11
  • Figure 5: 77% of global internet users have made a purchase at least once over the internet, 2005
  • Figure 6: Germany, Austria and the UK have the largest number of internet users who have used the internet to make purchases, 2005
  • Figure 7: The online commerce is growing rapidly in Europe and the US, 2001-06
  • Figure 8: The average spend per internet user in the UK has become comparable to the US, 2001-05
  • Figure 9: The service sector accounts for the majority of online spending in the UK, 2001 and 2005
  • Figure 10: Online retail spending in the UK and the US accounts for 3.1% and 2.5% of total retail sales respectively, 2005
  • Figure 11: Books, videos/DVDs and games are the most popular items purchased online but holiday related items (airline and hotel reservations) are also important, 2005
  • Figure 12: 59% of internet consumers have used a credit card to make a purchase online , 2005
  • Figure 13: Credit card is the preferred method of payment online, 2005
  • Figure 14: Merchants in the footwear and food and beverage sectors typically receive less than 5% of their total orders online, 2006
  • Figure 15: Barclays PINSentry is a further attempt to tighten security in the online space, 2008