A Guide to Optimize Your Online Payment Strategy

8/9/2019 A Guide to Optimize Your Online Payment Strategy

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A Guide to Optimize your Online Payment Strategyand Grow International Sales

Inc lud ing c a se stud ies f rom :

Co-autho red b y Edg ar, Dunn & Comp any


2/16 2009 GlobalCo llect. All rights reserved . 2 of 16

Tab le of Contents

1 Executive Summary 3

2 Introduc tion 5

2.1 The evo lution of e-comme rce 5

2.2 Best prac tice s for online me rcha nts pursuing internationa l grow th 6

2.3 Rise of alte rnative forms of pa ym ent 7

3 Benefits Fram ework 8

3.1 A signific ant op po rtunity to reduc e cost of ac cep ting pa ym ents 8

3.2 A significa nt op po rtunity to inc rease revenue s 9

4 Case Study Rosetta Stone 10

4.1 Benefits 11

5 Case Study Financ ial Times 12

5.1 Benefits 13

6 Sizing Benefits of Both Ca se Stud ies 14

7 About Globa lCollec t 15

7.1 Conta c t de tails 16

2009 Globa lCollec t and EDC. All rights reserved.

The works of a uthorship c ontained in this pap er, includ ing but not limited to a lldesign, text and imag es, are owned , except as otherwise expressly sta ted,by G lob al Collec t Services B.V., and ma y not b e c op ied , rep rod uced , transmitted ,d isp layed , d istribu ted , sub licensed , a ltered for subseq uent use or otherwise used inwho le or in part in any ma nner without the prior written c onsent o f Globa l Collec tervices B.V.. Globa l Collec t Services B.V. sha ll not be held liable for any da ma ge s

nc urred as a result of using informa tion c onta ined in this pub lica tion.Si


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1. Exec utive SummaryO

nline m erc hants need to op timize the last m ile of g lob al e-co mmerc e

There is not m uch new to lea rn ab out the size o f globa l e-commerce . Rec ent p rojec tions forec ast tha tglob a l e-comm erce will exceed $1 trillion by 2011. So it is b ig and it is grow ing fast.

However, there is still plenty to lea rn ab out whe re to play and how to w in in this globa l e-comm ercespac e - this is exac tly wha t this white p aper is abo ut.

Where to p lay? Not only at hom e

It is ob vious tha t there is still plenty o f potentia l for growth in e-com merce in most sec tors (travel, reta il,consumer electronics, gaming, digital downloads, etc.). However, most of this growth opportunity mightnot be loc a ted in your home ma rket, but ab roa d. Forrester forec asts tha t only 13% of Internet users will belocated in North Am erica by 2013. For instanc e, ove r 90% of the m arket oppo rtunity for Rosetta Stone (oneof the case stud ies in this white pape r) is loca ted outside of the USA.

This confirms tha t the re is a significant g row th p ote ntial for online m ercha nts ta rge ting c ustom ers loca ted incountries suc h as China o r Ind ia, as well as in reg ions suc h as Europe o r La tin America .

How to win? By ad dressing the last mile of payments

Just like successful bricks-and-mortar retailers, successful online merchants have to address many aspectsof the sales cyc le, inc luding targeted ma rketing, a ttrac tive merchand ising, c ompe titive p ric ing, web sitepe rformance, and so fo rth. But many online merchants fa il to a ddress the last mile o f their interna tiona lsales. Namely, how to accept online payments from an international customer base and thus turn browsersinto buyers?

For insta nce, ma ny online mercha nts will miss out o n sa les if they do not a ccep t the loc a l forms of p aym entpreferred by loca l consumers. Suc h as in Germa ny, whe re less tha n 10% of online sa les a re p a id for withc red it c ards.

So wha t s the solution? Choosing the right p ayment p artner and ta king a struc tured approa ch

Ad dressing this last mile issue o f pa yment accep ta nce w ill req uire:

Establishing a multi-functiona l internal tea m o f experts foc used on ena bling p aym ent a ccep tanc e for

international markets

Selec ting a pa yment pa rtner such a s Globa lCollec t tha t c an help d eliver this internationa l grow th p lan

and c onsult on loc al legislat ion, popular pa yment me thod s and cultural pitfalls

Follow ing best prac tice s such as offe ring the releva nt choice of payment methods. These might inc lude

direct debits; eWallets (e.g. PayPal); real time bank transfers (e.g. iDEAL); prepaid cards (e.g.

Paysafecard); cash transfers (e.g. Boletos Bancrio in Brazil); or deferred payments; in addition to

stand ard card brands

2009 GlobalCo llect. All rights reserved . 3 of 16


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This white p aper inc lude s two c ase stud ies (The Financ ial Times and Roset ta Stone) show ing how lead ingonline merchants have p artnered w ith Globa lCollec t and followed be st prac tices to g row their

interna tiona l b usiness.

What is the imp ac t of op timizing pa yments? Millions in c ost savings and in inc rem enta l reve nues

Research among these two case studies indicates potential payments-related cost savings (by individualme rchant) c lose t o 300,000 and incrementa l reve nues c lose to 1 million 1. These be nef its include :

Red uc tion in tota l cost of ac cep ting p ayments, driven by:

Set-up o f a single IT interfac e with a Payment Service Provider (PSP) to hand le a ll payment method s

ac ross a ll count ries / reg ions

Autom ate d / strea mlined rep orting, rec onc iliat ion, rem ittance, and dispute hand ling

Ab ility to use (and chang e) multiple ba nks, ac quirers, and alternat ive pa yment providers

Ac cep ting forms of pa yment w ith low / no c hargeb ac k risk and w ith a set fee p er item

Integ rated fraud prevention tools

Increase in revenues, driven by:

Inc rea se in the c onversion rate thanks to a choice of p referred loc al pa yment m ethod s in loc al

currencies

Fewer lost sales due to time-outs or declines

In a nutshell, op timizing pa yment ac cep tance is c ritica l for tapping successfully into the global e-comm erce o pp ortunity. Howeve r, pa yment a ccepta nce is comp lex and rap idly cha nging. As such,choosing the right pa yment pa rtner is one of the most important d ec isions for an o nline m erchant.

The Financ ial Times and Rosetta Stone case stud ies c learly show tha t G loba lCollec t c an help onlinemerchants address this last mile of p ayment a ccep tanc e a c ross multiple count ries. Thanks to its 15 yea rsof experience in the payment industry and handling well over one million transactions daily, GlobalCollectcan help online merchants not only red uce payment accep tance c osts, but a lso inc rea se revenues

through bo osting c onversion rates thanks to offering the releva nt range of p aym ent m ethod s.

1 For a typical online merchant with annual sales of 100 million



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2. Introduc tion

2.1 The evo lution of e-com me rc e

Most of us ta ke the Internet a nd e-com merce fo r granted . But ma ny of us ma y not rea lize how fa st it is stillgrowing g lob ally and how this imp ac ts the w ay we do business. Based on a JP Morga n estimate , globa l e-comme rce w ill ca rry on g row ing significantly to the point o f exceed ing $1 trillion b y 2011. That eq uates to

ap proxima te ly $2 million online sa les pe r sec ond .

$ in billions 2008 2009E 2010E 2011E

e-commerce* $379 $412 $491 $561

Travel $329 $342 $405 $458

Total $708 $754 $896 $1,019

*Excluding e Bay volume and excluding TravelSourc e: JP Mo rgan North Ame ric a Equity Researc h, 26 June 2009

This rap id g row th in e-com merce is pa rtly driven b y a similar inc rea se in the glob al online pop ulation.Based on Forrester1, the total global online population will increase from 1.5 billion Internet users in 2008 to2.2 billion by 2013.

However, what is more interesting is wherethese Inte rnet users will be loca ted . By 2013:

43% of Inte rnet users will be in Asia

22% in Europe

13% in North America

11% in Latin America

Another wa y to look at this geog rap hical shift in the g lob al online p op ulat ion is to conside r the c ountrieswith the mo st Inte rnet users. In 2008, the country with the most Inte rnet users was the USA. In 2013, it w ill be

China, fo llow ed by the USA, followed by India. There w ill still be a higher pe r ca p ita online spend in the USA,but online merchants need to b e a wa re of m ajor international grow th op po rtunities outside the m orema ture markets suc h as the USA.

The largest online merchants a re a lrea dy op timizing these internationa l grow th opp ortunities. If we look attwo o f the large st online p layers:

Amazon: the International segment (e.g. excluding sales from .com and .ca websites) represented 47%

of Ama zon s consolida ted revenues in 20082

eBay: Europ e a nd Asia represente d 54% of tota l reve nue3

1Sourc e: Glob a l online p op ulation forec asts, 2008-2013 rep ort issued by Forrester (July 21, 2009)2 Source: Amazon 10K3 Sourc e: eBay Analyst Day 2009 presenta tion



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2.2 Best p rac tices for online me rc hants pursuing inte rna tiona l growth

While internationa l markets offe r grea t g row th opportunities for online m ercha nts, they a lso p resentsignificant c ha lleng es. There a re some b asic b est p rac tice s to keep in mind :

1. Keep ing it local, espe c ially for pay me nts

In order to e ffec tively target custom ers in foreign m arkets and c om pete with loc a l businesses, it isnec essary to ta ilor the web site for eac h local ma rket. One o f the key foc us a rea s in p rovid ing a successfulloc alized user experienc e inc ludes ac cep ting relevantloc al pa yment method s.

Offering a va riety of p op ular loc al payment metho ds is essent ial to ensure the w idest p ossible ad dressab lecustomer ba se. To sta y current , it is nec essary to kee p t rack of local deve lopm ents in paym ents ma rkets

and ad d ac cepta nce of preferred forms of pa yment, both trad itional ca rd-based forms of pa yment (e.g.Ma sterCa rd , Visa) a nd a lterna tive forms of p ayment (see later).

2. Offering loc al langua ge a nd supp ort

Customers expec t a website to be displayed in their loca l lang uag e. Loc al do ma ins and IP ge olocationcan b e used by the merchant to d isplay the local lang uag e based on the users loc ation and browsersettings. Localizing customer service through providing a local telephone number, multi-language call-center and live-help mea ns that customers do not have to call internat iona lly for any p re-purchasequeries.

3. Providing releva nt pricing

By detec ting the loc at ion o f a user, the m ercha nt c an display p rices in the loc al c urrenc y. Custom ersshould a lso ha ve the op tion to switc h currenc ies as req uired . As a c onseq uenc e, the m ercha nt shouldac cep t p ayments in multiple c urrenc ies.

4. Ensuring that risk mana ge me nt is not an after-thought

While offering m ultiple p aym ent m ethod s can lead to more sales, eac h pa yment me thod has distinc t riskparame ters. Examp les of these inc lude:

A users ab ility to reverse a pa yment a fter the transac tion has be en p laced meaning tha t immed iate

pa yment to the merchant c annot be guaranteed

Linkage of payment me thod s to o ther payment d evices (such as linking a wa llet to a c red it c ard) and

the knoc k-on e ffec t o f c hargeb ac k risk should a users wa llet b e c ompromised and transac tions plac ed

on his/ her credit c ard

The a verage transac tion size, cost, and loc at ion. For examp le, de tec ting high usag e o f a loca l payment

scheme by users outside of the do mestic m arket m ay sugg est c ompromised ac counts

Fraud ulent use o f c red it c ards, which c an be significantly red uced by using a rang e o f fraud sc reening

tools like IP ge oloc at ion or neural networks to dete c t susp icious pat terns

The oc currenc e of so c alled friend ly fraud (when the c onsumer mad e a purcha se b ut c laims not to

have ma de it) tha t c an be high in some sec tors such a s trave l (e.g. a consumer tries to canc el an airline

ticket tha t is not eligible for chang es or canc ellat ion)



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Understa nd ing these issues and set ting the c orrec t th reshold s is essent ial to ensuring tha t g rowth is notac compa nied by increases in fraud and chargeb ac ks. Paym ent Service Providers often ha ve a loca l

ma rket p resenc e and spe c ific expertise in loca l payment me thod s tha t a re used to fine-tune risk mod elsand provide merchants with intelligent rules-based transaction monitoring.

2.3 Rise of a lterna tive fo rms of payme nt

One of the important aspec ts of keep ing it loc al is ac ce pting the ap propriate mix of pa yment method sfor ea ch country. Payment c ards (e.g. deb it or credit ca rds) are the most c ommonly used pa ymentinstruments online in ma ny c ount ries, but e-comme rce me rchants should a lso assess the bene fits of alternative forms of p aym ent. For instance, alternative pa yment methods are estimated to rep resentap proxima tely 10-12% of Europ ea n online p aym ents tod ay, a nd Edg ar, Dunn & Com pa ny expec ts theshare of alternative payments to increase to 15% - 20% by 2015.

What a re a lternative paym ent me thod s? They inc lude fo rms of pa yment not b ased on de bit / c red it cardssuch as: direct debits, eWallets (e.g. PayPal); real time bank transfers (e.g. iDEAL); prepaid cards (e.g.Paysafe card); cash transfer (e.g. Boleto s Banc rio) or defe rred pa yments. These a lternat ives typica llytarget c onsumers that cannot use a de bit o r credit c ard such a s unba nked c onsumers, minors, orconsumers tha t a re simply not willing to use their card for an o nline p urchase.

Example: iDEAL (Netherlands)

iDEAL (launc hed in 2005) enables customers of the ma jor Dutch banks to authorize online transac tions viaonline banking instea d o f by entering c ard d eta ils. The service has been we ll rec eived by Dutc h consume rsand merchants a like; and iDEAL has expe rienced rapid up ta ke as a result.

Source: Currence iDEAL B.V

Dutch c onsumers a re a do pt ing iDEAL for seve ral rea sons including: sec urity (not ente ring payment d eta ilson me rchants we bsites); speed (no ne ed to reg ister); and pricing (no surcharge s for iDEAL shop pe rs).

And Dutch merchants have started a ccepting iDEAL as they pa y lowe r ac cepta nce fees comp ared toc red it c ards; have no risk of cha rgeba cks; rec eive immed iate paym ent confirma tion; and can leveragelower accep ta nce fees to offe r d iscounts to iDEAL shop pers.

The rest o f this white p ape r explores the b ene fits assoc iated with (a ) wo rking w ith the a pp rop riate Payment

Service Provider and (b) o ffering the relevant m ix of p ayment m ethod s for online m erchants to expandgeographical reach and drive international growth.



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3. Benefits Framework

In ma ny cases, merchants foc us on a ll of the key a c tivities req uired to set up a successful e-com merceop eration, exce pt one : payments. This last step in the buying experience is ofte n overlooked , a lthough it isone o f the most impo rtant step s. Why does pa yment m at ter? Simp ly be cause c hoosing a nd setting up theright p ayment solution will help o nline me rchants turn browsers into b uyers and thus grow interna tiona lly ina p rofitable ma nner.

Befo re looking a t two spe c ific case stud ies to illustrate this point, it is wo rth ide ntifying the multiple ways inwhich the pa yment function has a d irec t impac t on the m erchants botto m line.

3.1 A signific ant o pp ortunity to reduc e to tal cost of a c cep ting p ayments

At first, accepting payments can represent a significant cost for online merchants, and therefore deservesma nag eme nt attention. For instanc e, Edg ar, Dunn & Compa ny co mp leted a globa l survey of 19internat iona l airlines: these airlines indica ted that their tota l cost o f a ccep ting pa yment c ards wa seq uiva lent to $12.50 per airline ticket .

There a re five ma in levers that a merchant c an use in orde r to reduc e the to tal cost of a ccep tingpa yments, including:

1. Setting up a single IT interfac e to ha ndle all pay me nts ac ross all c ountries

One op tion for mercha nts is to set up and m a intain multiple p oint-to-po int IT interfac es, e.g. one interfac e

with eac h ba nk, or with ea ch form of p aym ent (e.g. PayPal)

Another op tion is to set up a single IT interface w ith a payment service p rov ider that c onne c ts in turn with

a ll banks and forms of p ayment, thereb y resulting in low er upfront a nd ong oing IT expe nses for the

merchant

2. Automa ted / strea mlined repo rting, rec onc iliation and d ispute hand ling

Many large merchants still use heavily manual processes to handle back-office payment operations such

as rec onc iling c ard p ayments or handling p aym ent d isputes

Some payment p roviders can help me rchants auto ma te a nd strea mline these bac k-office paym ent

processes, thereb y resulting in fewer FTEs a lloc ated to these b ack-office ta sks

3. Ab ility to use (and c hange) multiple ba nks

Connec ting to a p ayment service p rovider indepe nde nt of ba nks enables mercha nts to use (and / or

change) multiple banks instead of being locked in a single-bank relationship in a specific market

This typ ica lly results in lower banks fee s tha nks to com pet itive p ressure

4. Ac ce pting forms of pay ment with low / no c hargeba ck risk (e.g . rea l-time bank transfer suc h a s iDEAL)and with set fee (instead of ad valorem fee c alculated as a p ercentag e of the p urchase a mount)

5. Integ rated fraud prevention tools tha t m aximize the sa fety of Custom er Not-Present (CNP)transactions inless than a second prior to payment authorization



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Some pa yment providers have alrea dy integ rate d fraud prevention too ls from spe c ialized software

vendors

As such, mercha nts can imp leme nt fraud prevention too ls faster and c omb ine the right too ls to help

them red uce fraud losses without a nega tive imp ac t o n their tota l sales volume

3

.2 Not only a c ost red uc tion o pportunity, but a lso a n op portunity to inc rea se revenues

In add ition to p otential c ost savings, the right pa yment solution c an help me rchants generate incrementa lreve nues via two m ain leve rs:

1. Offering a wide and relevant range of loc al paym ent options results in more customers willing and able

to buy online or rem ote ly, thus increasing the conve rsion rate significant ly

Examp le 1: there a re 28 million unb anked consume rs1 in the USA a nd 45 million unde r-banked . For these

two segments, it would make sense to a ccep t forms of p aym ent such as prep aid cards or ca sh. For

instance, Continental Airlines enables consumers to make an online booking and pay cash

Examp le 2: in Europe , many c onsume rs do no t have c red it ca rds or prefer non-ca rd b ased forms of

payment suc h a s iDEAL in the Netherland s or ELV in Ge rma ny. For insta nc e, less tha n 10% of online sa les in

Germany are pa id for with a c red it ca rd 2

2. Reliab le pa ym ent tec hnology results in fewer lost sales (due to t ime-outs, dec lines)

A key req uirem ent for any online m erchant is to ensure the highe st leve l (ide a lly 100%) of ava ilability fo r its

payment acc eptanc e function

Site Confidenc e c onduc ted a study a mong the UK's top online retailers be twe en January 1 and March

17, 2009: on averag e, the sites tested we re una va ilab le to com plete t ransac tions 3.75% of the t ime

1 Sourc e: The C enter for Financ ial Service Innova tion

2 Source : Bunde sba nk study on p aym ent b eha viour in Ge rmany, 2009



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4. Case Stud y Rosetta StoneWhat could be a more of a n internat iona l business than a compa ny solely foc used on p rovidingtec hnolog y-based language learning solutions in 31 langua ge s? Rosetta Stone Inc. is such a com pany. Itcom pleted a suc cessful IPO in ea rly 2009. Initial results a re imp ressive w ith tota l sa les of $50.3m in Q1 2009,with a 43% increase over the p rior yea r period in its consumer business.

And interna tiona l expansion will be a ma jor contributo r to its future g row th: in its p rospe c tus for its IPO,Roset ta Stone listed increa sing our foc us on sizea ble non-US ma rkets as one o f the four p illars in its grow thstrategy. Which m akes a lot o f sense c onsidering tha t over 90% of the $83bn consumer langua ge learningmarket1 is loca ted outside of the USA!

This interna tiona l expa nsion sta rted in 2005 when Roset ta Stone set up a UK web site. In order to spee d up itstime-to -market, Rosett a Stone leverag ed its existing banking relationship to o b ta in a m ercha nt fac ilityena b ling c ard a ccep tanc e in the UK. As Rosetta Stone was p lanning on launc hing loc al websites for sa les

in Germany and Jap an, it quickly rea lized that it wo uld no t be scalab le to set up a loc al tec hnical /ba nking relationship to supp ort c ard a ccepta nce in ea ch c ountry.

As suc h, Rosetta Stone d ec ided to conduc t a Req uest for Proposa l (RFP) process in early 2006 to selec t asingle payment ve ndor tha t w ould p rovide sca lab ility a nd flexibility. At the end of this RFP proc ess, RosettaStone selec ted a short-list o f two c ompa nies, inc luding Glob a lCollec t. To q uote Rosetta Stone, Glob alCollec t blew the c omp etition out of the wa ter . A co ntrac t wa s signed and GlobalCollec t enab ledcard acc ep ta nc e suc cessfully in Germany in 2006, Japan in Ap ril 2007, UK in 2007, and USA in 2008.

Based on this expe rience in multip le co untries, wha t ha ve b een the ma jor quantifiable b ene fits for RosettaStone? EDC interviewed and wo rked with Rosetta Stone rep resenta tives to estima te the m a jor bene fits.These include three cost reduc tion benefits and two revenue enhanceme nt b enefits.

1Sourc e: Nielsen a s c ited in the Rosetta Stone prospec tus



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Bene fit 1: low er IT expenses tha nks to a sing le c onne c tion to Glob a lCo llec t s p roc essingplatform

Instea d o f deve loping a bespo ke co nnec tion for ea ch co untry and / or form of pa yment, Rosetta Stoneonly set up a single c onnec tion with Globa lCo llec t. Based on the compa nys experienc e, this has ma de itmuc h easier to a dd new fo rms of payment resulting in much faster development time and lowerma intenance expenses. Acc ording to fee db ac k from Rosetta Stone , a single c onnec tion toGloba lCollec t s p roc essing p latfo rm has resulted in low er IT expenses equivalent to a 30% red uc tion insolution d elivery time a nd 75% red uc tion in design time .

Benefit 2: low er ba c k-office expenses thanks to autom ated / strea mlined p roc esses

Rosetta Stone used to unde rtake very ma nual p roc esses to c lea r its ac count receivab les and to rec onc ilecredit card transactions with daily bank deposits. GlobalCollects reporting and tools have resulted in a fullautomation of these back-office processes, thereby generating an on-going savings equivalent to 3 Full-

Time Equiva lents (FTEs).

Bene fit 3: low er fraud ra tes tha nks to a faster integ ra tion w ith a th ird -pa rty fraudprevention to ol

As mo st online m ercha nts, Rosett a Stone ha s to upg rade frequently its fraud prevention tools andprocesses to keep credit card fraud under control. Not rapidly addressing this issue can result in lost sales /high refund amo unts, la rge fines assessed by Ma sterCa rd / Visa and pote ntially termination o f themerchant ac co unt.

Globa lCollec t ena bled Rosetta Stone to comp lete a muc h faster integ rat ion with a third-pa rty vend or offraud prevention services. Roset ta Stone estima tes that it g a ined a t least tw o m onths tha nks toGlobalCollect enabling this much faster integration. Assuming hypothetically a potential reduction in fraud

rate of 0.5%, this would be equiva lent to a saving in excess of $150,000 (Note : Rosetta Stone d id notprovide an estima te of its fraud rate so w e a re o nly using an illustrative e xamp le of 0.5% ba sed onred uc tion in fraud rates ob served a t o ther large online me rchants. This estimate is therefo re illustrative b ut islikely to b e unde r-sta ted as it do es not include estimates for any Ma sterCa rd / Visa fines or refund s).

Benefit 4: imp rove d c onve rsion ra te a nd b roa der rea c h

Globa lCo llec t ha s and will enab le fa st-grow ing mercha nts such a s Rosetta Stone to ac hieve broad erconsumer rea ch thanks to a wide and ap propriate rang e o f forms of p ayment. As Rosetta Stoneexplained , Globa lCollec t w ill co ntinue to play a key role in our plans to grow internationa lly b ec ause of itshigh comp etenc e in alternative pa yment met hods, espe c ially w ith c ash-eq uivalent instruments outside the

US. They ha ve c ommitted significant resource s to key m arkets tha t a lign strategica lly with the ma rkets

we ve ident ified as significan t g row th o ppo rtunities for our langua ge -lea rning softw are. This ena b les us to

rea ch more c ustom er segments than w ith traditiona l payment method s alone.

Benefit 5: higher sa les (fewer lost sa les) tha nks to bet te r up time

As for most o nline m erchants, one of t he key requirements for Rosetta Stone is upt ime (for c red it cardautho rizat ion requests). In other words, the few er the numb er of p lanned or unplanned outa ges, the b ette rfor the merchant.

Based on the comp any s experienc e (c ompa red to its prior pa yment proc essors), Glob alCollec t p rovidesstruc tura lly bet te r up time . As Roset ta Stone sta tes, Globa lCollec t does have excep tional monitoring andc risis response c apa b ilities and w e ve b een hap py with their level of service.

This be tte r up time is due to tw o fa c to rs:

In ad dition to Glob alCollec t s dua l da ta c enter with CSC in Cop enhagen (Denma rk), Globa lCo llec t has

the ab ility to fail-ove r to a third data c ente r with Terremark in Miami (USA) if both p rod uc tion netwo rks a t



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CSC are rend ered inac cessible

If the ac quiring ba nk (providing the interfac e v ia MasterCard / Visa to the issuing ba nks that have to

autho rize the c red it c ard transac tions) is do wn, Globa lCollec t c an switch over to a ba ck-up ac quirer

Rosetta Stone ind ica ted tha t: Globa lCollec t ha s consistent ly de livered on its 99.9% up-time gua rantee,which it stands be hind w ith an SLA. They feel confident to commit to this uptime b ec ause they ha ve a

trac k rec ord o f success for high ava ilab ility transac tion p roc essing . And this ma tters when ea ch hourgene rates sa les of $23,000 on a verage fo r Roset ta Stone.

5. Case Study Fina nc ia l Times

Who nee ds to be introduced to The Financ ial Times?

A lea d ing g lobal provider of b usiness informa tion, it contribute d to FT Group sales of 796 million in 2008 (a16% inc rea se vs. 2007)1. What is less known is tha t the FT and the FT Group have undertaken two ma jorchanges to their business models:

A m ajor shift to wa rds d igital services (inc ludes p roviding intelligenc e, va luations and ind ices through

Mergerma rket, FTSE and Interac tive Data ): d igita l services rep resented 67% of FT Group revenues in 2008,

up from 28% in 2000

An e qua lly ma jor shift from advertising to subsc rip tion revenues: ad vertising ac counte d for 25% of FT

Group revenues in 2008, do wn from 52% in 2000. This has involved a new foc us on d riving users to reg iste r

and bec ome subsc ribers. A g rea t e xamp le is FT.co m: it inc rea sed its numb er of reg iste red users

from150,000 (end of 2007) to 1.5 million in Sep temb er 2009

As part o f this increasing foc us on subsc ription, The Financ ial Times wa nted to achieve tw o o bjec tivesrelated to payments:

1Sourc e: www .pearson.com/ index.cfm?pag eid=202



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Provide its new and existing subsc ribers with a b roa d range of c onve nient and prefe rred forms of

pa yment for ea ch key co untry

While not increa sing the internal co sts d riven by this broa d rang e of loc al forms of p ayment

Financ ial Times Limited (FTs newspaper business) selec ted G lobalCollec t to hand le its payment processingac ross Europ e in order to support its internat ional expansion a nd its migrat ion towa rds a subsc riptionbusiness mod el.

Form of payment Countries

Credit cards (American Express, MasterCard, Visa) All

Local cards Carte Bleue (France), Dankort (Denmark), and CartaSi(Italy)

Direct debits Austria, Denmark, Netherlands and Spain

Bank transfer European countries

EDC interviewe d FT rep resenta tives to e stima te the ma jor bene fits ge nerate d b y Globa lCollec t.Globa lCollec t has ena bled ac cep tance of c ards, chec ks, direc t deb it a nd b ank transfers for FTsnew spaper subsc rip tions since 2003.

Benefit 1: lower IT c osts d riven b y a single IT interfac e w ith Glob a lCollec t

As ment ioned by FT, it would m ake no sense to de velop new contrac tual relationships on a n individua lbasis betw een FT and ea ch new paym ent m etho d like iDEAL or PayPal. With its scalable single-interfacepa yment platfo rm Web Co llec t, Globa lCollec t ha s provided FT with an idea l and customized solution.

Using a b a llpark estima te o f 20 person d ays req uired to d eve lop each new connec tion, FT believes tha t theupfront cost sav ings (exclud ing a ny ma intenance costs) is likely to exceed 10,000 (assuming 500 perperson day) per connection.

Benefit 2: low er ba c k-office c osts (ac c ounting, finance) tha nks to autom ated full servic epayment p roc essing inc luding reconc ilia tion a nd rep orting

A ma jor benefit provide d b y Globa lCollec t is the strea mlining a nd a utoma tion of ac c ounting proce ssesrelated to p ayment ac cep tance. Instea d o f co mp leting multiple ma nual proc esses in order to reco nc ile

new subsc riptions and renew als with rec eived payments, FT can com plete most rec onc iliationsauto ma tica lly. This has resulted in an on-go ing c ost savings equiva lent to 3 FTEs.

Bene fit 3: offe ring wide rang e o f loc a lly preferred forms of p ayme nt supports highrenewal rates

FT wa nted to p rovide a wide range of fo rms of p ayment to its subsc ribers in orde r to p rovide a moreconvenient buying experienc e a nd to supp ort pa pe r-to-online m igration for all customer co mmunicat ions.

FT had not yet qua ntified the a c tual uplift in renew al rate s driven b y the w ide r choice of forms of p ayment,but it b elieves that providing the a pp rop riate m ix of p ayment m ethod s will generate higher renew als rate s.

FT qua ntified the cost sav ings assoc iated with the migrat ion from pa pe r-ba sed to online communica tions

sent to subscribers at time of renewal. Currently, the combined cost of sending renewal letters and paperbills corresponds to about 5 per subscriber contract. And offering the relevant forms of payment hascontribute d to this pa pe r to online comm unicat ions m igration.



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Payme nts will p lay a role in supporting FTs internationa l deve lop me nt p lans

In o rder to support its overa ll business strateg y, FT is conside ring a number of future initia tives that will havea pa yment dimension, inc luding:

Potentia l add ition o f new currenc ies, inc luding loc a l currenc ies ac ross Asia-Pac ific (Singapore, Hong -

Kong, Ind ia, South Korea , Australia)

New forms of p ayment: Globa lCollec t w ill enab le FT to b roa de n in late 2009 its range of fo rms of

payment fo r online subsc riptions including:

1. Cred it cards (America n Express, MasterCard, Visa)

2. Bank transfers in 52 co untries: For most Europea n c ountries as well as Africa (e.g . Nigeria, South

Africa) and Midd le East (e .g. UAE, Saud i Arabia )

3. Direc t deb its in Austria , Ge rmany, Nethe rlands, and Spa in

4. Rea l-time o nline b anking in Belgium, Germa ny, and Nethe rland s

5. New channe ls for acquisitions of subsc ribers (e.g . online refe rra ls)

Based on the suc cessful existing business relationship, GlobalCollec t ha s a lso b een inc luded as a PSP in

an FT p itch to grow the ir FT.com business further

6. Sizing Potentia l Benefits of Both Case Stud iesBased on these two case stud ies (FT and Rosetta Stone), we q uantified these po tent ial benefits assoc iatedw ith b est-in-class payment set-up for a typica l 100 million m ercha nt selling via remo te channels:

Benefits Potential sizing Potential financial impact

Cost reductions

Lower IT expenses due to singleconnection

Savings of 20 man days per newform of payment

100,000

Lower back-office expenses Savings of 2-3 FTEs 120,000 per year

Lower fraud Reduction equivalent to 0.1% ofsales

100,000

Incremental revenues

Fewer lost sales due to downtime Equivalent to 8-9 hours ofadditional availability

100,000

Increased conversion rate Equivalent to 1% of sales 1,000,000

Note 1: Pote ntial sizing and po tential impa c t are e stimate d on the ba sis of a typic al online merc hant with annua l sales of 100 million.Ac tual impa ct will depe nd hea vily upon the merchant s industry and pa yment set-up.

Note 2: low er IT expenses assume upfront c ost of 1,000 per ma n d ay a nd 5 c onnec tionsNote 3: lowe r ba c k-offic e e xpenses assume av erage yea rly c ost o f 40,000 per FTE pe r year



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7. About Globa lCo llec tGloba lCollec t is the wo rld's p remier Payment Service Provider of loc al e-payment solutions for internat ionalCustom er Not-Present (CNP) channels. A p ioneer of glob a l payment p roc essing with 15 years ofexperienc e a s a full service p rovider, we ha ve a proven t rac k rec ord to help our merchants rea lize theirglobal am bitions and expa nd their e-co mmerce a c tivities ac ross the w orld. GlobalCollec t s knowledg e o fthe international pa yment land scap e a nd loc al pa yment p reference s unique ly qua lifies it to ad vise yourcompa ny on ho w to inc rea se online c onversion rates, expand distribution c hannels, and strea mline b ac koffice m atching a nd rec onc iliat ion p roc esses.

GlobalCollects single-interface online payment platform offers you access to an unrivalled portfolio ofpaym ent m etho ds in over 200 c ountries and fo r 170 currenc ies. The late st p latfo rm up grad e emp ow ers you

as a m ercha nt to p roc ess pa yment transac tions in 28 languag es, inc luding a ll ma jor Europ ea n lang uage s,simp lified Chinese, Japanese, Hindi, Arab ic, Farsi, Russian, Heb rew , and ma ny more. Plus, Glob a lCollec t isba nk indepe ndent a nd ha s the largest netw ork of a cquirers, ba nks, and alternative p ayment p rovidersworldwide.

Since G loba lCollec t is ba nk indepe nde nt, it c an offer you the flexibility to wo rk with a c ombination of m anybanks. We have partnered with lead ing inte rnat iona l financ ial institut ions like Barc lays, First Da ta , AIB, BNP,HSBC, Wells Fargo, RBS, and others. These relationships, coupled with our sta tus as a m arket leader, ena b leus to offer the best possible rates for card and alternative payment processing - economies of scale thatwe pa ss on to you as a m erchant.

Our scalable Fraud Screening Service fea tures a rang e o f integ ra ted fraud red uc tion too ls from renowne d

partners to ma ximize transac tion sa fety prior to payment authorizat ion. These include custom ized businessrules, online account validation, neural networks to detect suspicious patterns, IP geolocation data tode termine the rea l-world loc at ion o f a we b visitor, pre-chec k for fraud ulent use o f c red it c ards and more.

More Sa les? More Glob a lCo llec t.

Com pa nies that c hoose Globa lCollec t ge t muc h more than a p ayment p roc essor. Bec ause of our 15-yea rhistory as a full service p rovider in the internat iona l e-com merce ma rketplac e, we are a ble to offer you agloba l consultanc y comp lete with informa tion ab out loc al regulations, area customs, and c ulturalpaym ent p refe renc es. Mercha nt fund ing is currently availab le in 14 currenc ies.

We can help your compa ny to inc rea se its internat iona l market share significantly by ena bling you toprovide your customers and distributors with the ability to pay with their preferred method and in their localcurrenc y by:

Internat iona l and loc al credit and d eb itcards

Direc t de bits Real-time bank transfers Bank transfers

Ca sh and bill pa yments eWallets Prepaid methods Virtual ba nk ac counts Checks



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Globa lCollec t ha s be en trusted b y lead ing me rchants including Financ ial Times and Rosetta Stone, andma ny other mercha nts in vertica ls including Trave l, Reta il, Gaming , Software, Music, Pub lishing, Streaming

Med ia, Soc ial Networking , Ticke ting, Direc t Selling , Telecom munica tions and O nline Porta ls.

Finally, the f irst two q ua rte rs of 2009 have shown the strong est results Glob a lCollec t ha s see n in its 15 yea rsof existence. We c ont inuously outp erform market grow th rates, with our average t ransac tion volumegrowing significant ly ab ove 50% eve ry yea r. This positive trend is also reflec ted in Globa lCollec t expand ingits glob a l presenc e b y op ening a n office in Buenos Aires next to the existing Am sterdam, Singapo re, andSan Franc isco loca tions in the nea r future.

Contac t us tod ay to see how Globa lCollec t c an help your com pa ny to enter foreign markets and growour business.y www.globalcollect.com

GlobalCollect EMEA

Planetenw eg 43-592132 HM Hoo fdd orpThe Netherland ste l: +31 (0) 23 567 1500

info@globa lcollec t.com

GlobalCollect APAC

8 Tem asek Boulevard# 21-04 Suntec Towe r Three ,038988, Singaporete l: + (65) 6408 8222

info@globalcollec tap ac .c om

Globa lCollec t North America

Three Emb arca dero Ce nte r, Suite 1190San Francisco, CA 94111United Sta teste l: +1 (415) 975 0969

info@glob alco llec tusa.c om

Globa lCollec t Latin America - Coming Q3, 2009

Buenos AiresArgentina

info@glob alco llec tlatam .com

About Edgar, Dunn & Company

Edg ar, Dunn & Com pa ny (EDC) is an inde pe ndent g lob al financ ial services and pa yments consultancy.Found ed in 1978, the firm is widely reg arde d as a trusted adv isor to its c lients, providing a full range ofstrateg y consulting services, expe rtise a nd ma rket insight. From o ffices in Atlanta , Frankfurt, Lond on, Paris,San Franc isco, Singa pore and Sydney, EDC delivers ac tiona b le strateg ies, mea surab le results and a uniqueglob a l perspec tive fo r clients in more tha n 35 countries on six cont inents. www.edgardunn.com
http://www.globalcollect.com/http://www.globalcollect.com/http://www.globalcollect.com/mailto:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]:[email protected]://www.edgardunn.com/http://www.edgardunn.com/http://www.edgardunn.com/mailto:[email protected]:[email protected]:[email protected]:[email protected]://www.globalcollect.com/http://www.globalcollect.com/

Documents

A Guide to Optimize Your Online Payment Strategy