Online payment issue needs to be solved

Walk into a Nordic brick and mortar retailer, and it is usually simple to split a purchase among different payment instruments. You can pay part with cash and part with card, or split the amount among multiple cards. But move online, and you are forced to complete the entire transaction on a single instrument (one card). 

This can obviously be an issue when a customer doesn't have enough funds in a single account, but becomes especially grieving when paying with a scheme-based prepaid card. Unless the prepaid balance matches the exact amount of the shopping cart, there will either be breakage on the transaction – or no payment made at all. 

Splitting an e-commerce purchase across multiple cards shouldn't be that difficult from a technical point of view. It can be done in the brick and mortar environment, after all, and according to fellow industry professionals, e-retailers across the pond can already do it. Nordic payment service providers are hereby encouraged to step up and look into this issue. It could result in a competitive advantage. 

This post is an extract from MACAW Payments Bulletin 62: Payment issues that need to be solved.

Payments in Norway

The Bank of Norway recently published its much anticipated annual report on payments in Norway, providing 2009 statistics and updated information on the status of the Norwegian payment systems. MACAW research summarizes and comments.

CARD TRANSACTIONS

The growth in card use is strongly linked to household consumption. Despite economic turmoil, household consumption increased 2.3% in 2009, while the value of all card payments on Norwegian cards increased by 6.1% to NOK 645.9 billion. The total number of transactions grew by 8.4% to 1.28 billion transactions, equivalent to 246 transactions per capita in 2009, according to the Bank of Norway.

The growth in card value is a bit higher than expected based on analysis of historical data, indicating a continued strengthening of the position of cards vs. cash. This is also supported by cash withdrawal statistics, which reveal that ATM withdrawals on cards issued in Norway fell by 5.6% (6.2% domestic) if measured in no. of transactions and 3.0% ( 4.3% domestic) in value.

POS transactions on Norwegian cards used domestic and abroad increased to 1.18 bn (9.8%) with a value of NOK 486.5 billion (9.1%). Of this, the value of cash withdrawals at POS remained constant at NOK 27.8 billion, but the no. of such transactions continued to decline and was reduced by 2.9% compared to 2008.

DEBIT AND CREDIT

No. of debit card transactions in 2009 increased by 90.0 million (8.2%) year-on-year to record-high 1192.8 million, and value increased by NOK 30.4 billion (5.8%) to 556.3 billion. In comparison, the no. of credit card transactions increased by 10.1 million (17.9%) to 66.6 million in 2009, and card value grew by NOK 8.6 billion (14.8%) to 66.6 billion in total.

While credit cards saw two-digit relative growth in 2009, in absolute figures, the no. of debit transactions outgrew credit transactions by 9 to 1 and value by 3.5 to 1. Comparing the relative growth rates to previous years, both debit and credit cards experienced lower growth in 2009 than 2008, but higher growth than 2007. One conclusion drawn is there are no signs that Norwegian card use was adversely affected by the economic situation. Considering the development in household consumption, Norwegian card use even outgrew expectations.

An interesting side note is that the use of charge cards declined in 2009, after sporting several years of growth. One plausible explanation could be card issuers migrating charge card customers to more profitable credit cards. The decline could also simply be the result of increased competition from the increased number of credit card brands on the Norwegian market, with customers actively switching from charge to credit cards.

CARDS ISSUED

The number of issued cards increased by one million from 2008 to 2009, up from 10.6 to 11.6 million cards. 55.9% of cards were chip cards at the year-end of 2009.
For the first time, the number of debit features declined (down 0.9%) and ended at 11.8 million at year-end. Note that BankAxept and Visa debit are counted as two different features – so a great number of cards have two features.

Assuming the figures are correct, the no. of credit cards saw explosive growth, up by 1.2 million (26.9%) to 5.5 million features. The number of charge cards remained stable. In absolute figures, the growth in credit features is previously unparalleled in Norway. Compared to earlier years, 26.9% growth is very strong (vs. 1.0% in 2008, 20.9% in 2007, 22.9% in 2006). Apparently, the economic downturn did not deter banks’ determination to push credit cards, and 2009 also saw a number of new card concepts put on the market.

However, card turnover did not keep up with the growth in credit card features. Spend per credit feature dropped from NOK 13,370 in 2008 to NOK 12,095 2009, and the no. of transactions per credit feature fell from 13.0 to 12.1. This is a clear indication that competition is intensifying in the credit card sector. Still, the transactions and spend per credit feature were higher in 2009 than they were in 2007, so the size of the cake is also increasing – even if not as fast as the growth in no. of card features...

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Blippy goes live

Blippy, the social media service that broadcasts your card purchases, has officially launched. It is less than a month ago that MACAW research wrote about Blippy being tested in beta by 5,000 users and shared our thoughts in the MACAW Card Bulletin. Now it's gone live.

While the key question Twitter answers is "What’s happening?" Blippy answers the question "What are your friends buying?" Users link a credit or debit card to a Blippy account, and when they make a transaction on the chosen card, the information is broadcasted in the form of a "blip."

Every "blip" uses the format "X spent Y dollars at Z", i.e. "Jon spent 20.99 dollars at Sport Club." For select merchants, such as iTunes and Amazon, a list of purchased items appears in the Blip as well. In other words, people can see other users’ purchases down to the product level – such as a song or book title.

People following a given user can comment on transactions. They can also see which other users purchased something at "place Z" and what other purchases user "X" has performed. Those who jump on the latest technology inventions, and especially those who already blog or micro blog about their purchases, could find Blippy appealing. Instead of manually typing an update on what they have bought, they can now automatically generate a message instead, thus saving time.

Blippy is controversial. The average user probably has transactions they want to keep private. In an article from the New York Times, co-founder Philip Kaplan was cited, saying that most cardholders have two or more cards. Only one card is intended to be linked to Blippy. In other words, users would only make their transactions known on a select card - a public card.

It remains to be seen whether Blippy will be a success or failure. If it does fail, it would be somewhat ironic as co-founder Philip Kaplan himself once operated a website that ridiculed the many failed web concepts back in the dot com era.

For social media enthusiasts who blog about their everyday purchases, Blippy might be just the thing to speed up their micro blogging. Be careful if buying a gift, though, as someone will see what you are buying - and you could risk being hounded if the price is too low or the gift is bought at "the wrong shop." Then again, maybe you don't want to buy those people gifts in the first place...