Emerging markets and online payment solutions

What do you know about emerging markets and online payment solutions for
expatriate communities? Probably not as much as you really need to know

Andrea Wilson
is chief executive
ofcer, director and
co-founder of First
Atlantic Commerce.
Andrea has extensive
experience of inter-
national, ofshore
and domestic card
payment and risk
management
solutions.

Tricia Lines Hill
is the VP of market-
ing and corporate
communications at
First Atlantic Com-
merce. She has over
15 years’ experience
in global market-
ing and corporate
communications,
and eight years in
the credit card
processing
space.

WHERE WoULD yoUR business be in today’s global market if you could not support the way consumers wish to pay? over the past 10 years, businesses have evolved from post ofce collection invoices and ‘the cheque is in the mail’ invoice payments to sophisticated online payment solutions involving wire transfers, credit cards, ACH, e-cheques, money transfer serv-ices and digital cash solutions.

Consumers are much more likely to purchase from a website that communicates in their language and local currency. And with millions of people accessing the internet in a language other than Eng-lish, website localisation and translation is clearly important in expanding and improving sales. So is
fexibility.

Gaming operators know that if they want to target a specifc consumer population, they have to ofer regional games in foreign languages and online payment options in the currencies of the players’ jurisdiction.

Typically, in the past, it was difcult to secure regional or domestic payment solutions in order to market to expatriate consumer pockets, but the internet has changed the landscape by allowing merchants to connect and service consumers from all over the globe regardless of their operational jurisdiction.

Understanding local money transfer regulations (both in and out) in target markets is critical to ensuring you are able to support the payment needs of consumers in those markets.

Expat workers in traditional markets

As the internet gaming industry expands into emerg-ing markets, and operators increasingly focus on pay-ment and language options to attract new consum-ers, they need to take a serious look at whether they are providing the right payment options for their traditional markets. Interestingly, immigrant groups within established markets are ofen overlooked.

“Friendly fraud cannot
be completely prevented”

According to a UN population estimate, the US has the largest number of immigrants, at 38.4 million in 2005, accounting for 12.9% of the total population. The US emigrants constituted about 0.8% of the total population. The top ten immigrant sourcing countries for the US at the end of 2005 were Mexico, Philip-pines, Germany, India, China, Vietnam, Canada, Cuba, El Salvador and the UK. The majority of immigrants are from Mexico and other Latin American countries.

According to the International Association of Global Money Transfer Networks, the US is also the world’s largest outward payment remittance market. The total amount of outward remittance was US$42.2bn, or 0.3% of the country’s GDP in 2006. This means that the expatriate markets are needing payment and remittance solutions that are convenient, secure and reliable.

In recent years, with increased globalisation of economies, opportunities for expats have increased substantially. Companies in developed nations are looking for more skilled workers at lower costs to reduce their employee cost; a need met by the expat workers. The recent credit crisis is laying signifcant pressure on US companies to reduce their costs, there-by leading to increased skilled labour force sourcing.

We have seen that even in English-speaking coun-tries, a signifcant percentage of immigrant groups worldwide are searching the internet in their native language, rather than the language of their adopted nation. As well, they would like to be able to spend money online in their local currency, rather than their adopted country base currency. The pressure to remit money home for family maintenance needs remains very strong in second- and third-world countries.

For instance, merchants may think that their Euro-pean business only needs payment solutions in euros and pounds sterling. However, they must consider the large expatriate communities within the European market. Take the Indian consumer market in London, for example. The ability for merchants to process Indian rupees credit card transactions may win them the consumer sale, however remitting back to this same cardholder will be a challenge for the mer-chant if they have not thought through or incorporated a localised remittance serv-ice that allows their Indian consumer to receive local funds in rupees. Remit2India is a product available for the Indian com-munities around the world (along with

Remit2Home) which identifes the need for ‘westernised’ merchants to understand the payment culture of lesser developed nations. Money transfers to India are esti-mated at US$28bn per annum.

Another example exists in Panama, where there are established tax treaties with Japan and a signifcant amount of Asian business takes place there. Finding an acquiring solu-tion in Central America that can support yen, Korean won, Malaysian ringgit presentment processing or JCB acquiring may be easier then you realise.

Alternative payment options
Implementing non-credit card alternative pay-ment services is an important factor for busi-nesses to consider as part of the payment proc-ess and when marketing to expatriate communities in target markets. Alternative payment solutions are not only convenient for consumers but can be more fexible and inexpensive for merchants if you can implement them securely.

PayPal, which can be implemented by connecting to First Atlantic Commerce’s international payment gate-way, provides online merchants secure access to over 350 million worldwide PayPal consumer accounts – in local currencies. So if you are targeting Chinese mar-kets, PayPal is the obvious solution with which to start. Similarly for the South American market, implementing PayPal to receive Brazilian Reals transactions is far sim-pler than trying to set up an acquiring solution in Brazil.

What about protecting your business from online payment fraud?
Implementing regionalised payment solutions and tailoring for specifc consumer markets also creates a breeding ground for fraudsters and money laundering. Banks hammer on about Knowing your Customer (KyC) but what about Knowing your Enemies? Chargebacks and fraud have become especially problematic for online merchants in this credit crisis market as it lends itself to fraud and chargebacks from consumers who are unable to pay their outstanding credit card bills.

Consumers that charged transactions to their credit or debit cards three months ago are now charging them back under the ‘zero liability’ issuer programmes (chargeback RC 23 and RC 83) as they can no longer aford to pay their bills due to job losses or investment losses, consistent with the economic climate.

Friendly fraud cannot be completely prevented as you cannot prevent a consumer from initiating a chargeback. you can, however, mitigate your risk to these fraud chargebacks by implementing 3-D Secure solutions. Verifed by VisaTM and MasterCardTM

local markets as many cards are issued for use only with local currency). The right international pay-ment provider can help.

Through a single integration, a good payment partner will enable merchants to work with various acquiring banks in diferent jurisdictions around the world for card processing (thereby lowering costs to entry) as well as enable them access to various pay-ment types in multiple currencies, which lowers the costs and time associated with direct integrations to each payment method.

Gaining access to alternative payment options via one implementation is key. Not only is it a cost saver in terms of integration time and IT resources from the outset, but it allows the operator to spend less time on managing these payment infrastructures going forward.

One should remember, however, that it is never possible for one vendor to ofer every global payment type. Operators need to zero in on what they require for their business and compare those needs against other payment requirements. Many payment solu-tion providers, for example, do not facilitate direct merchant accounts for credit card processing, which means that the merchant will not have direct con-trol of their funds. Other payment providers may not ofer a full suite of fraud management tools, so it is important for an operator to weigh out its needs.

But clearly, there is an expectation now for pay-ment gateways to ofer a full portfolio of payment so-lutions. Just as the toothpaste industry transformed consumer preferences by introducing added features, best-in-breed online payment gateways shifed the thinking behind online businesses.

That will do nicely