© Merchant Risk Council September 2014 Merchant Risk Council Global Payments Survey

Survey Overview

The Merchant Risk Council (MRC), with the assistance of Edgar, Dunn & Company (EDC), has created this Global Payments Survey report to provide a comprehensive payments resource for its members. The 2014 report is the first of its kind in an annual series of surveys. To mark the end of the survey, the MRC, with EDC have released this current survey data, collected from both MRC member and non-member payments professionals who participated in the survey. This report will provide key trends, best practices, and insights to help your company to advance your day-to-day payments operations as well as benchmark your payment performance across the industry.

EDC, an international consultancy specialized in payments, conducted the MRC Global Payments Survey in May-June 2014, this report summarizes the key aggregated results and conclusions.

A total of 114 merchants responded to the online survey that was sent out – the demographics of these merchants can be found in the Appendix. Additionally, 21 merchants across North America and Europe participated in one-on-one interviews with EDC.

The MRC and EDC would like to thank the survey participants for taking the time to participate in the online survey and the face-to-face interviews. If you are interested in discussing any of these payments-related findings and their implications, the MRC and EDC are pleased to organize a follow-up conversation to discuss in further detail the learnings from this survey and how MRC members can optimize their payments function.

Produced by EDC for the MRC in collaboration with the MRC Benchmarking Committee & MRC Payments Committee

MRC Global Office EDC San Francisco 1809 7th Ave, Suite 1403 505 Montgomery Street, Suite 610 Seattle, WA 98101 San Francisco, CA 94111 Tel. (+1) 206.364.2789 Phone: +1 415 977 1870 Fax (+1) 206.367.1115 Fax: +1 415 977 1879

MRC European Office EDC Paris Office Ibercenter, Gran Via 6 5ème étage 28013 Madrid, Spain 42 rue Vignon Tel. +34 915247512 75009 Paris, France Fax +34 915247499 Phone: +33 1 4007 9224 www.merchantriskcouncil.org http://www.edgardunn.com/

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Executive Summary

The payments sector is experiencing major and rapid structural changes, especially as it relates to ecommerce. Change will come in the following five key categories:

Technological Changes: Technology is changing how customers shop and pay for goods. For instance, the continuing fast growth of mobile commerce requires a different payment approach.

New Consumer Behaviors: Primarily as a result of new technologies, consumers have increasingly higher expectations related to the payment experience.

Regulatory Changes: Governments around the world are impacting card economics and enabling merchants to play a different role in the payments value chain.

New Entrants: There are a vast number of new payment alternatives, and some of them will enable merchants to increase conversion rates and tap into new markets.

Changes in : Fraudsters constantly change tactics and techniques, in large part driven by new buying patterns and channels as well as changes in card present payments.

In reaction to these changes, merchants need to optimize four payment issues to support growth:

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Merchants surveyed are at a range of stages with regards to optimization of payments - from large multinational merchants that have an extensive team and dedicated resources to manage payments; to start-ups focused on their home market, where payments management is only one of many responsibilities for an individual. Reflecting the experience of this disparate group, the key points from this survey are:

The complexity of payments today and in the future requires that merchants develop a clear payments strategy in order to support their business and increase revenue.

Internal barriers such as resource constraints and IT system challenges usually pose the largest barriers to optimizing payments, both in terms of adding new payment methods and processes as well as enhancing current policies and practices.

Merchants are increasingly looking to key performance indicators (KPIs) and data from their payment partners to measure and optimize their payments, but significant disparity remains in how far merchants are in this process, leading to inconsistent definitions and usage of specific metrics.

Offering new payment methods remains a significant priority for merchants, but they are also increasingly focused on how to incorporate new channels (e.g. mobile) and new approaches to commerce (e.g. omnichannel) in their businesses.

Significant opportunities remain for payment providers to enhance the services that they offer merchants, in order to serve as a true partner and subject matter expert on payments to their clients.

Fortunately for merchants, resources exist to support them as they navigate the complex world of payments. By sponsoring surveys such as this and the Global Fraud Survey, and offering a rich schedule of educational and networking events, the Merchant Risk Council strives to provide a robust set of resources to help merchants better optimize payments.

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Contents

1. Merchants Must Establish a Clear Payments Strategy ...... 1 1.1 Payments are a critical component of ecommerce ...... 1 1.2 Merchants face internal resource constraints ...... 1 1.3 Merchants remain focused on projects that will help grow the business and keep customers engaged...... 2 1.4 Data is key to managing payments but remains a significant challenge to consume ...... 4 2. KPIs Are Required to Track Performance Against the Chosen Payments Strategy ...... 5 2.1 Top KPIs for merchants include authorization declines and /fraud rates ...... 5 2.2 Merchants track their KPIs with a range of different frequencies ...... 6 2.3 Authorization decline rates are one of the most important KPIs for merchants ...... 7 2.4 Interchange pricing provides pricing transparency for merchants but might not necessarily be appropriate ...... 8 3. Payment Acceptance Policies and Practices Are a Key Part of the Payments Function..... 10 3.1 Merchants take a structured approach to determining which payment methods to accept ...... 10 3.2 Bank cards remain dominant, but some ‘alternative forms of payment’ are no longer alternative ...... 11 3.3 Merchants are still adding new payment methods, but are becoming more discerning ...... 13 3.4 Looking forward, merchants are focused on appealing to consumers and reducing friction ...... 15 3.5 Merchants with recurring payments face unique challenges when optimizing payments and sales ...... 16 4. Merchants Must Set Up the Appropriate Internal Payments Team and Processes ...... 17 4.1 Due to increasing complexity and importance, payments functions are growing within companies ...... 18 4.2 Varying payment team structure – is there a structure that is most effective? ...... 19 5. Payment Providers Can and Should Be a Key Partner ...... 20 5.1 Multiple relationships increase the global reach for merchants ...... 21 5.2 Cross-border vs. domestic payment transactions ...... 22 5.3 Merchants are beginning to expect more from Payment Service Providers ...... 23 6. Conclusion ...... 24 Appendix ...... 25 1. Definitions ...... 25 2. Survey Demographics ...... 26

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Tables

Figure 1: Top payment challenges over last 12 months ...... 1 Figure 2: Biggest payment challenge over the next 12 months ...... 3 Figure 3: Top payment challenges by merchant vertical ...... 3 Figure 4: Source of information to determine whether payments are optimized ...... 4 Figure 5: Most important KPIs related to payments tracked by merchants ...... 5 Figure 6: Frequency of reporting key metrics ...... 6 Figure 7: Average authorization decline rates in key markets ...... 7 Figure 8: Average authorization decline rates in key markets by merchant vertical ...... 7 Figure 9: Reasons for not providing authorization decline data...... 8 Figure 10: Current type of merchant pricing ...... 9 Figure 11: Preferred type of merchant pricing ...... 9 Figure 12: Methods used to determine the right payment methods for a country ...... 10 Figure 13: Current payment acceptance policy by country ...... 11 Figure 14: Other notable payment methods across markets ...... 12 Figure 15: Additional payment methods under consideration ...... 13 Figure 16: Key drivers for adding new payment methods ...... 14 Figure 17: Percent of ecommerce sales through a mobile device ...... 15 Figure 18: Strategies used to optimize recurring sales ...... 16 Figure 19: Maximum number of retries in a 30-day period by payment type ...... 17 Figure 20: FTEs by payment function ...... 18 Figure 21: Breakdown of payment FTEs by merchant size ...... 18 Figure 22: Average number of relationships with payment vendors ...... 20 Figure 23: Reasons for multiple relationships with payment vendors ...... 21 Figure 24: Relationships with acquirers with cross-border or domestic license ...... 22

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1. Merchants Must Establish a Clear Payments Strategy 1.1 Payments are a critical component of ecommerce

Global business-to-consumer (B2C) ecommerce sales are forecast to grow by 20% in 2014, hitting $1.5 trillion1. Increasing internet and mobile penetration is helping more people around the world get online through a variety of means, resulting in a growing, diverse customer base. Merchants are consequently recognizing the importance of optimizing payments in helping to drive future growth and achieve high customer satisfaction amongst this wider customer base. As one example, one merchant reported that implementing ‘1-click’ in its mobile channel improved conversion rates by 33% in a channel that already made up 10% of its business. As another example, some large country markets (such as Germany) are not " centric" and require a different payment approach. 1.2 Merchants face internal resource constraints

Merchants report that business growth/expansion is their biggest current payments-related challenge, while checkout conversion comes in third. These results signal the important role that payments plays in increasing revenue and ensuring customer conversion. However, when combined, IT-related issues rise above all others, primarily both IT constraints, and system enhancements & technical integrations.

Challenge Rank Order

Figure 1: Top payment challenges over last 12 months

Internal Resource Constraints are Painful: This was a clear trend amongst merchants interviewed, who described difficulty in securing technical resources. Due to these resource limitations, payment projects are frequently passed over for other projects and/or the number of actual payments-related implementations are significantly limited in any fiscal year. Resource constraints are further exacerbated by the complexity of payments (e.g. an increasingly wide variety of payment methods across multiple markets and enhancements to existing payment products) and the fact that integration and testing work can cause significant delays in time to market. Merchants suffer from internal delays and bemoan the fact that some payment service providers (PSPs)/payment networks do not offer plug-and-play capabilities for their payment methods.

1 eMarketer 2014 forecast

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Fraud Remains a Significant Concern: Whilst fraud ranks fifth in the overall list of challenges, merchants that were interviewed consistently raised fraud as a key pain point, questioning why merchants have to absorb fraud losses. Further incumbent challenges exist for merchants addressing this issue including the fact that 3D Secure is not optimized for mobile (a key growth channel), the difficulty in getting usable fraud-related data from payment providers (such as actionable reason codes for declines), and newer areas of concern (such as affiliate channels).

Cost of Payments and Security are Not the Top Priorities: Despite recent data breaches and the growing pain around PCI compliance, particularly in Europe, security only ranks seventh on the list of top issues. Similarly cost of payments does not rate particularly high (sixth on the list), possibly a result of the primary, purely commercial focus of many ecommerce merchants on top line growth.

Overall, the conclusion is that issues around growing the business, which include expansion problems, checkout conversion, and issues arising from IT constraints, represent the biggest pain points for merchants over the last 12 months, whilst pure ‘payment issues’, such as fraud, cost, and security, are secondary.

Industry Perspective: The prevalence of system and IT resource constraints suggest that merchant payment managers need to work with their executive teams to continue to build awareness of the strategic value of payments (e.g. by showing the uplift in conversion rates that payments can generate at other merchants) and ensure appropriate internal resourcing. Merchants that have been more successful in this regard are then able to focus on better optimizing their payments structure.

Merchants could also combine their feedback to PSPs and payment networks/schemes in order to encourage the development of “plug-and play” implementation options.

1.3 Merchants remain focused on projects that will help grow the business and keep customers engaged

Individual conversations with merchants identified two key areas of focus for projects over the next 12 months.

Adding New Payment Methods: Not surprisingly, this topic remains a key focus, particularly for merchants with operations in Europe where there is a stronger demand to meet local payment preferences. Additionally, mobile remains a hot topic for the upcoming year as merchants try to determine how best to serve the mobile channel and respond to customer preferences for payments via this new channel.

System Enhancements: Given the fact that IT is such a pain point for merchants, it is not surprising to see so many merchants with system enhancement projects on the agenda for the next 12 months. Common themes include increasing payment process automation, improving system efficiency, and better leveraging payment data. Specific projects that were common amongst multiple merchants include improving payment recycling by leveraging error code data, building A/B testing capabilities for payments, and working to improve payment flows.

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Figure 2: Biggest payment challenge over the next 12 months

Interestingly, when asked about the biggest payment challenge over the next 12 months, merchants responded more strategically, with only 1/4 of respondents reporting fraud, security, and cost as the top issue. One-third (1/3) of respondents cited omnichannel as the biggest challenge (either an omnichannel payment method or the customer payment experience across multiple devices). Not surprisingly, given topics already discussed, international expansion and mobile also ranked highly.

While cost and security are known focal points for merchants, their attention is clearly also directed towards growing the business, staying competitive, and ensuring that customers can engage with the merchant and pay via any channel in any manner that they prefer.

Looking at specific merchant verticals, omnichannel remains the top concern for digital goods, physical goods, and travel & ticketing merchants. While physical goods merchants are focusing on the commerce experience aspect, the other merchant types are - not surprisingly - more concerned about omnichannel payment methods. The second ranked concern for digital goods merchants is international expansion, most likely reflecting their ease in conducting business across borders. International expansion also tops the agenda for non-travel services merchants (business services, advertising, etc.). Not surprisingly, fraud is the second highest concern for physical goods and travel & ticketing merchants.

Industry Perspective: Merchants that have not begun to tackle omnichannel, international differences, or mobile are at a competitive disadvantage to first movers that successfully address the related payment challenges. The best practices might not yet be fully defined for these challenges, so it will be important for merchants (and/or their PSPs) to be able to adopt a "trial and error" approach and learn quickly.

Merchant Type Ranking Digital Goods Physical Goods Travel & Ticketing Omnichannel – Omnichannel – experience Omnichannel – 1 payment method in store/online/mobile payment method

2 International expansion Fraud Fraud

Mobile – Mobile – Mobile – 3 mobile payments mobile payments mobile payments

Figure 3: Top payment challenges by merchant vertical

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1.4 Data is key to managing payments but remains a significant challenge to consume

Most merchants strive to optimize payments, but the task remains difficult largely due to the lack of available and relevant hard facts. Merchants report leveraging a variety of sources of information to optimize payments, including talking to payment providers (71% of respondents), using benchmark data (69%), and talking to colleagues (64%). Only 36% reported taking advantage of MRC resources, whilst 36% said they used A/B testing, which is a process wherein the merchant only slightly adjusts a payment page to examine the impact on conversion.

Xx% = merchants that selected the option

Figure 4: Source of information to determine whether payments are optimized

Merchants also report that they are looking to utilize payment data to better manage their business, though significant challenges remain both in receiving and securing the payment data. Merchants report difficulty in receiving usable, consistent data across the variety of PSPs/payment networks used.

Ultimately, payments is a data-driven business, and thus it is imperative that merchants are able to leverage the data generated by payments to better run their business.

Industry Perspective: Like many businesses, ecommerce is awash with data, and payments is no exception. PSPs have a significant opportunity to improve the quality of their own reporting whilst also helping merchants take better advantage of the raw data to optimize their payments. Additionally, there is a clear need to establish industry standards for payments reporting, similar to what has been defined for fraud reporting. Merchants should also consider adopting more rigorous methods (such as A/B testing) and better leveraging of existing industry resources.

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2. KPIs Are Required to Track Performance Against the Chosen Payments Strategy 2.1 Top KPIs for merchants include authorization declines and chargeback/fraud rates

Payments key performance indicators (KPIs) are essential for merchants to measure their progress towards improving their payments process.

KPI Rank Order

Figure 5: Most important KPIs related to payments tracked by merchants

Merchants report a wide array of metrics tracked, though certain metrics emerged as more widely tracked than others, including:

Authorization Declines: This was the most important indicator tracked by merchants and is particularly prevalent amongst those operating in Europe, likely related to the increased complexity of the payments landscape compared to North America. Interestingly when survey responses are separated by merchant segment, digital goods merchants appear to be more focused on authorization declines than retailers of physical goods.

Chargeback & Fraud Rates: Merchants in both Europe and North America generally place equal importance on these issues. Viewing the survey results by industry indicates this issue has a higher importance amongst physical goods merchants compared to digital and travel merchants.

Conversion Rates: Conversion rates are widely monitored by merchants, reflecting the importance of payments converting browsers into actual buyers. Merchants continue to explore new ways to improve conversion rates, using effective methods such as A/B testing and minimizing payments-related friction in the checkout process.

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Other important indicators that are tracked include checkout abandonment and cost per transaction. Orders per day and new customers were mentioned as indicators but did not rank as highly.

An interesting trend worth noting is that digital goods merchants tend to focus more on KPIs related to measuring revenue such as authorization declines and conversion rates. Physical goods merchants, whilst also interested in conversion rates, place larger importance on cost-related KPIs such as chargeback and fraud management, as well as checkout abandonment rates.

Industry Perspective: It is essential for merchants to set up a dashboard that enables them to monitor payments-related KPIs for their business. This might require some internal development work (and working with their PSPs), but payments cannot be optimized without proper KPIs. The old adage "when you cannot measure it, when you cannot express it in numbers, your knowledge is of a meagre and unsatisfactory kind" (Lord Kelvin, 1883) is certainly applicable to online payments.

2.2 Merchants track their KPIs with a range of different frequencies

The frequency of reporting KPIs varies across merchants from reports at single intervals (e.g. once a month) to multiple intervals (daily, weekly, etc.).

Figure 6: Frequency of reporting key metrics

Monthly reporting is the most common, with a series of merchants receiving reports only on a monthly basis whilst others have a mix of both monthly and weekly reporting. The majority of merchants that employ real- time reporting also use daily reporting, and some of the real-time reporting is set up as real-time alerts based upon certain triggers (e.g. a predefined change in conversion rate triggers an alert). Across all respondents, merchants can generally be split between those with frequent, regular reports (i.e. daily and real time) and those with less frequent reports (i.e. week or more). Whilst some merchants have yet to employ any reporting for KPIs, they are in the minority since most merchants have some type of reporting.

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Industry Perspective: Merchants must clearly define their goals as a business and align their KPIs accordingly whilst ensuring key payments metrics are tracked with the appropriate frequency. This is important

to ensure the business is monitored and payments-related problems are caught as early as possible to minimize losses and customer impact. Clearly, revenue protection KPIs (e.g. authorization decline rates) should be monitored as frequently as possible, ideally in near real-time. On the other hand, cost management KPIs (e.g. total cost of payments) could be monitored with a lower frequency.

2.3 Authorization decline rates are one of the most important KPIs for merchants

Noted as the top performance indicator, the survey responses reveal that authorization decline rates vary between countries and merchant segments.

The table below shows average authorization decline rates for the markets that were most frequently cited as a top 5 country. The data in this table has been edited to remove high risk merchants2 who predictably skew the data to higher averages.

Country Average Median Max Min

United States 9% 8% 25% 0% United Kingdom 11% 8% 30% 1% Germany 12% 8% 29% 1% France 14% 11% 25% 3% Figure 7: Average authorization decline rates in key markets

On average merchants in European countries have higher decline rates (highest rate being in France), which may be caused by a higher usage of cross-border acquiring in Europe. Merchants interviewed have described how their authorization rates have improved as a result of switching from cross-border to local acquiring in some of these European markets.

Country Average Median Max Min

Physical Goods

United States 6% 4% 18% 0% United Kingdom 6% 6% 8% 5% Germany 7% 8% 8% 5% France 10% 9% 16% 6% Digital Goods

United States 13% 14% 25% 1% United Kingdom 14% 16% 30% 1% Germany 11% 8% 25% 1% France 19% 20% 25% 6% Figure 8: Average authorization decline rates in key markets by merchant vertical3

2 Merchant categories removed include adult entertainment, dating sites, and MMO gaming companies. 3 Merchant categories removed include adult entertainment, dating sites, and MMO gaming companies. Insufficient data was provided in other merchant categories to be included in this table.

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Furthermore, when breaking down the decline rates by industry and country, it appears that digital goods merchants have a higher average decline rate. One reason for this might be that digital merchants tend to cover more markets earlier in their business lifecycle due to the digital delivery of the product, whereas physical goods must be shipped, which limits how quickly many of these merchants expand internationally. ‘Global’ PSPs can enable higher market coverage faster, but this is frequently achieved through a series of cross-border acquiring connections that may result in lower authorization rates for certain markets.

More than half the merchants surveyed (51%) did not provide any information on decline rates as part of this survey. The top reason for this was that merchants could not disclose the data, but combining the next two reasons – “unable to the data” and “hard to compile” – shows that many merchants are simply unable to leverage this data.

Figure 9: Reasons for not providing authorization decline data

Industry Perspective: Authorization declines are a key measure of payment success, and those merchants unable to analyze the data, and thus optimize based upon it, risk losing achievable revenue. Merchants should enquire about the reporting facilities available from their acquirers – some can support sophisticated analysis such as decline rate by BIN range. Merchants should also be seeking help in interpreting decline data to ensure minimal lost revenue due to this issue. Equally, acquirers and payments service providers could set themselves apart by improving their product offering and reporting in this area.

2.4 Interchange plus pricing provides pricing transparency for merchants but might not necessarily be appropriate

The most common pricing methods for card acceptance were, in descending order: interchange plus4, interchange plus & blended rates5, and blended rates.

4 "Interchange plus" refers to a pricing methodology used by some acquiring banks in their MasterCard/Visa card acceptance contracts with merchants. In summary, this pricing methodology means that the merchant pays at least two items on each card transaction: (1) the actual (interbank fee that flows from the who has the relationship with the merchant to the issuing bank who has the relationship with the cardholder), plus (2) an additional service fee charged by the acquiring bank. The acquirer also typically ‘passes through’ other fees in this type of pricing arrangement. 5 "Blended rates" refers to another pricing methodology used by some acquiring banks in their MasterCard/Visa card acceptance contracts with merchants. In this case, the merchant pays an "all inclusive" merchant service fee.

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Interchange Blended Interchange plus Unable Country Other plus rates & blended rates to share

United States 47% 7% 18% 27% 1% United Kingdom 31% 17% 27% 25% 0%

Germany 22% 17% 27% 34% 0% France 26% 21% 21% 33% 0% Canada 50% 7% 18% 21% 4% Spain 20% 10% 25% 45% 0%

Italy 17% 28% 17% 39% 0% Netherlands 36% 18% 36% 9% 0% Australia 73% 9% 9% 9% 0% Brazil 33% 33% 17% 17% 0%

Figure 10: Current type of merchant pricing Interchange plus pricing is gaining popularity amongst many merchants (especially amongst the largest merchants) since it provides the greatest transparency in fees, though at the expense of introducing more complexity into payments management.

Interchange Blended Interchange plus Unable Don’t Country Other plus rates & blended rates to share know

United States 52% 7% 7% 14% 18% 3% United Kingdom 60% 9% 6% 11% 15% 0% Germany 53% 10% 3% 15% 20% 0% France 45% 13% 3% 18% 21% 0% Canada 52% 10% 7% 10% 17% 3% Spain 42% 11% 11% 16% 21% 0%

Italy 47% 18% 0% 18% 18% 0% Netherlands 64% 9% 0% 9% 18% 0% Australia 82% 0% 9% 0% 9% 0% Brazil 67% 0% 0% 17% 17% 0%

Figure 11: Preferred type of merchant pricing

That said, the survey revealed that merchants are paying little attention to their interchange. The majority of respondents are not receiving interchange optimization reports, and thus large majorities are unsure whether their rates are optimized. Even more surprising is that a large number of merchants who are receiving interchange reports are unable to interpret them, since they remain unsure of whether they are getting the best rate.

U.S. merchants are more confident than their European counterparts regarding their interchange optimization, although the number in the U.S. is still relatively low compared to the total number of respondents. This is not surprising, however, since interchange plus pricing arrangements have been more widespread in the U.S. for a few years. An opportunity exists to help bridge geographical differences by adopting the U.S. reporting standards on interchange optimization in other markets around the world, including Europe.

Industry Perspective: Merchants do not appear to be paying much attention to the pricing structure of their card acceptance contracts. A reason for this may be the clampdown on interchange rates worldwide, especially within Europe where rates will likely soon be capped to 0.2% and 0.3% for debit and credit, respectively. However, complexity remains, particularly in the U.S., and thus a best practice is for merchants to regularly monitor their interchange reports to ensure transactions are qualifying at the best possible rate.

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3. Payment Acceptance Policies and Practices Are a Key Part of the Payments Function 3.1 Merchants take a structured approach to determining which payment methods to accept

As merchants expand into new markets and new payment methods emerge, the complexity around deciding which payment methods to accept has increased exponentially. Based on individual merchant interviews, new payment methods must meet key requirements to be considered for adoption, including: Sufficient User Base Sufficient Trust Security Low Friction Reasonable Cost of Acceptance

In cases when the need for a new payment method is uncertain, merchants employ a series of sources to support their decision making process.

Figure 12: Methods used to determine the right payment methods for a country

Research into evaluating payment methods for a particular country is a key step for merchants to determine the right methods to offer. Most merchants still leverage ad-hoc data, such as internal research (68% of respondents) or talking to peers (66%). Fewer than 50% of respondents reported using sources that leverage external research or data sets, with 47% relying on their payment providers, whilst only 43% are leveraging MRC research and reports. Additionally, only 35% reported using A/B testing, which allows for a more "scientific" and merchant-specific approach to testing payment methods. Other methods of research include looking at competitor offerings and using third-party or external consultants.

Additionally, merchants report having a variety of policies regarding the number of payment methods – some merchants still only accept bank cards, whilst others have explicit limits on the number of alternative payments per market to avoid confusing customers (e.g. no more than two-three alternative payment methods per market), or use a simple rule of thumb (e.g. "accept international cards, PayPal, and one local payment method"). Still others, typically in the digital space, have no specific limits, preferring to accept any method that meets their internal criteria.

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Ultimately, the selection of payment methods comes down to a balance between business goals and customer preferences. Some merchants report their practice is to only accept bank cards when entering into a new country; and then branch out into alternative payment methods once the market is established. Nevertheless, the effort to implement alternative payments can be significant. One European merchant reported needing nearly three years to convince management to offer payment methods beyond bank cards and then build the necessary infrastructure to support the strategy.

Industry Perspective: Offering payment methods beyond bank cards is an increasingly important part of a merchant’s payment strategy. It represents a best practice to meet customer preference in many countries, though selection of the payment methods must be done strategically. Determining the right payment method(s) for a particular merchant in a country remains a challenge – merchants should consider conducting A/B testing. In addition to discussing with peers, merchants should also leverage MRC resources, such as its surveys and its report library.

3.2 Bank cards remain dominant, but some ‘alternative forms of payment’ are no longer alternative

Across the merchants surveyed, bank cards remain the "first league" of the most widely accepted payments types6. Visa and MasterCard are accepted by all merchants surveyed, with showing at least 80% acceptance in the major payments markets7.

Figure 13: Current payment acceptance policy by country

Beyond these major players, few card brands have high market penetration, though there are some strong pockets of local cards (including Discover in the U.S. and Carte Bancaire in France). Other international brands, such as JCB and UnionPay, have a much lower profile amongst responding merchants (though JCB is accepted by about 1/3 of merchants in the U.S. and Canada).

PayPal is the most widely accepted “alternative” form of payment, with penetration of at least 60% of merchants in key markets, except for Canada and Australia. Bank transfer methods ("pull" ACH/SEPA Direct Debit or "push" ACH/SEPA Credit Transfer) are stronger in European markets, and in particular Germany (55% of merchants offer Direct Debit) and the Netherlands (54% offer iDEAL).

Mobile carrier billing is also stronger in Europe, with 29% of German merchants and 24% of French merchants offering this form of payment compared to only 13% of U.S. merchants. Whilst most of this is driven by digital goods merchants, some physical goods merchants in Germany and France, amongst other markets, do offer mobile carrier billing. Interestingly, merchants had mixed views on carrier billing, recognizing that it brings incremental revenue and new customers, particularly younger ones, to the table. However, some merchants remain unable to get past its higher cost.

6 Merchants were asked to provide payment methods accepted in their top 5 markets. As a result, conclusions are based upon data provided for only those markets. 7 Key payment markets as defined by this survey are those markets where at least 8 respondents indicated that they are in the top 5 markets for their company; these are the U.S., U.K., Germany, France, Canada, Spain, Italy, the Netherlands, Australia, and Brazil.

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Within the major markets, store cards and gift cards are offered most often in the U.S., which could represent an untapped opportunity for other markets, provided there is a culture of private label and/or gift cards.

Not surprisingly, the type of product sold does impact the type and variety of payment methods offered. Digital goods merchants tend to offer more payment types than merchants of physical goods or travel and ticketing merchants. Physical goods merchants showed higher acceptance of American Express, whereas digital goods merchants tended to offer PayPal, bank transfer methods (both credit and debit), and mobile carrier billing more frequently. Travel and ticketing merchants generally have the lowest variety of payment methods to offer, though at least one merchant in this category offered a wide array of methods, including UnionPay, AliPay, and bank transfer methods in its key countries.

8 Country Other Payment Methods offered in top countries ACH, Amazon, BillMeLater (PayPal Credit), checks, electronic checks, loyalty United States points, PayNearMe, UATP, Ultimate Game Card

CashU, Domestic Debit Cards, , Paysafecard, PugglePay, Skrill, Neteller, United Kingdom ecoPayz, Sofort, UKash ELV, GiroPay, SofortÜberweisung, Cash to Code, iDEAL, Klarna, Paysafecard, Germany UKash, ePINs Carte Bancaire, , Internet+, TicketSurf, Neosurf, Paysafecard, UKash, France Cofinoga, Paylib Canada Checks, Spain Domestic debit, Maestro, Paysafecard Italy Agos, CartaSi, PostePay, Paysafecard, UKash

Netherlands iDEAL, Bancontact/MisterCash, Sofort

Brazil Boleto, MercadoPago Figure 14: Other notable payment methods across markets

Beyond the major branded payment methods, there are a number of other payment brands accepted in certain top markets, as shown in the table above. Top methods offered include SofortÜberweisung and ELV in Germany (33% and 12% of merchants, respectively), Carte Bancaire and Carte Bleue in France (27% and 20%, respectively), and iDEAL in the Netherlands (92% of merchants). Outside of PayPal, no other methods dominate in the U.S., although 7% of merchants reported accepting checks. Additionally, it is interesting to note that some merchants are displaying some European market-specific payment methods (such as Bancontact/Mister Cash in Belgium and iDEAL in the Netherlands) on localized websites in other European markets. However, this is limited to 1-2 merchants with each payment method at this time.

Industry Perspective: Offering a variety of payment methods is critical in certain markets such as Germany and the Netherlands, and thus any merchant operating in these markets should consider local cultural habits and offer methods beyond bank cards. However, even in other markets such as the U.S. and Canada offering methods beyond payment cards increasingly represents a best practice to attract specific customer segments and meet evolving payment preferences.

8 This list is based upon merchant feedback from the survey; as a result, it is neither comprehensive nor directive but rather represents the input of those merchants that responded.

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3.3 Merchants are still adding new payment methods, but are becoming more discerning

Merchants continue to evaluate new payment methods, with 60% reporting that they are considering adding new payment methods in the next 12 months; 18% said that they were not considering new methods, whilst 22% did not know.

Figure 15: Additional payment methods under consideration

Some of the key methods under consideration include PayPal, SEPA Direct Debit for certain merchants across Europe, Barzahlen (a cash-based payment method) in Germany, and Discover and ACH payments amongst certain merchants in the U.S.

Also of note is the wide array of payment methods under consideration, as merchants in many countries continue to look at a variety of options, including methods that traditionally have a particular customer base outside of the merchant's domestic market (e.g. consideration of iDEAL by merchants in the U.K., France, and Germany, ELV by U.K. merchants, and Sofort by merchants in France).

The most important driver behind adding new payment methods is the opportunity they represent for driving new sales. The customer experience is a secondary driver. Lower processing costs are only the third-ranked driver whilst fraud ranks 6th on the list. Ultimately, the customer continues to drive payment acceptance (some merchants monitor customer service channels to help determine demand for certain payment methods), whilst operational concerns tend to be secondary. Merchants accept that payment methods must sustain sufficient volume and generate a positive impact for the business in order to remain on the menu of methods accepted.

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Driver Rank Order

Figure 16: Key drivers for adding new payment methods

Significantly, merchants continue to face challenges in on-boarding and offering new payment methods. The largest barrier cited by merchants is internal. The technology barriers that exist when implementing payment methods within existing systems increase investment requirements and thus create high payback requirements that are difficult to achieve. Other challenges include accounting/back office integration challenges, contractual arrangements, and support for recurring payments.

Merchants have also reported dropping certain payment methods as a result of little to no volume, which shows an increasing awareness of the costs of offering too many payment methods. In addition, payment methods that generate frequent errors or create internal processing volumes are more likely to be dropped, given the internal costs of acceptance. This rationale can also play a part when alternative payment methods are accessed by the merchant via larger payment service providers (PSPs). The full end-to-end processing capability of these payment methods via PSPs is of paramount importance to merchants.

Industry Perspective: Optimization of payment methods offered is an ongoing process. Best practices in this area include evaluating new methods by constructing a business case, and removing idle methods to minimize customer confusion. For many merchants, however, internal technical limitations may hinder optimization, making the evaluation that much more important and placing pressure on the merchant to either revamp internal systems to better support a more dynamic payments environment, or to consider alternative implementation approaches (e.g. using external payment providers to turn alternative payments into one-time card transactions).

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3.4 Looking forward, merchants are focused on appealing to consumers and reducing friction

Mobile is Key: Merchants continue to view mobile as critical to future growth and to gaining new customers, as well as maintaining existing ones. Of merchants that responded, over 50% reported that at least 21% of ecommerce sales went through a mobile device. Ticketing & travel merchants were more likely to have at least 20% of sales through a mobile device, whereas physical goods merchants had lower rates. Digital goods merchants were more widely distributed across the spectrum.

Figure 17: Percent of ecommerce sales through a mobile device

This trend is only likely to increase; nearly 20% of respondents saw mobile, either mobile payments or mobile websites, as their biggest payment challenges over the next 12 months. The key drivers for offering mobile are growth oriented: 1) customer experience, 2) opportunity for more sales, and 3) access to new markets. A challenge is to ensure that mobile is user-friendly with low friction. One merchant that added 1- click to its mobile channel saw a significant increase in conversion rates as a result.

eWallets Continue to Appeal: Broadly speaking, there is interest in ewallets, though many merchants are also taking a ‘wait-and-see’ approach to determine which wallet attracts the most users prior to making an investment decision. There are very few merchants that want to be first-to-market in this area. The variations in potential solutions that exist in the U.S. and Europe add to the complexity, though dominant players are emerging in some countries, which makes it more compelling for merchants to integrate.

Industry Perspective: Whilst mobile has gained a significant amount of industry buzz and attention, most merchants remain wary of committing investment to mobile payments/ewallets

until clear trends begin to emerge. Given limited resources and a large array of strategic projects, merchants are right to prioritize wisely. Developments in mobile payments (both payments with a mobile device, e.g. NFC-based payments, and on a mobile device, e.g. through the phone’s browser) should be followed closely so that appropriate mobile payment solutions can be implemented rapidly. In many cases, this is crucial for merchants as conversion rates for mobile commerce are currently much lower, frequently due to the payment process.

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3.5 Merchants with recurring payments face unique challenges when optimizing payments and sales

Online merchants that provide a service on an ongoing basis (e.g. monthly subscription service) prefer to accept payments from consumers via payment types that support recurring transactions. Since merchants charge transactions to payment methods stored on file on a schedule but without customer intervention, unique challenges exist as payment credentials can expire or become invalid, payment accounts may not have sufficient funds, etc. As a result, these merchants have some unique strategies to optimize sales and conversion.

Merchants must take a proactive approach to ensure payment details are correctly maintained for recurring transactions

Merchants employ multiple strategies to optimize their recurring sales, and a proactive approach is definitely required in order to ensure that the highest number of repeat transactions are converted into revenue. Across the respondents, two of the more popular strategies are:

Consumer Messaging Post Payment Failure: This strategy directly addresses the consumer in a simple and effective way and is employed by a wide variety of merchants. Payments may fail for a number of reasons including issues with the issuer but sometimes may be as a result of out-of-date payment information or insufficient funds. Thus, clear communication to the consumer can help increase conversion by providing the consumer with information as to what caused the decline, particularly if it is an issue that the consumer can fix.

Which of the following strategies do you use to optimize sales?

80% 75% 75% 70% 64% 57% 56% 57% 60% 43% 43% 50% 38% 40% Europe 30% 25% North America 20% 10% 0% Consumer Retry on some Consumer Account updater Retry on all messaging post transactions messaging in transactions payment failure depending on anticipation of regardless of payment method failed payment payment method or response value

Figure 18: Strategies used to optimize recurring sales

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Retry on Some Transactions Depending on Payment Method or Response Value: By not retrying certain transactions due to the payment method or response value, merchants are able to avoid unnecessary costs in retry attempts as well as move more quickly to alternate strategies, such as contacting the customer or halting the service so as to avoid losses. North American merchants are more likely to retry on all transactions, potentially due to the higher usage of credit cards and the lower occurrence of alternative forms of payment, which can pose more challenges to retry strategies.

Additionally, account updater is used more by merchants in North America, which is not surprising given the U.S. is the primary market for the tool and there is more limited availability in Europe.

Merchants vary their retry frequencies based upon payment method

The payment methods merchants retry the most are payment cards (credit, debit, and prepaid); which are frequently retried between 3-5 times. Direct debit payments (e.g. SEPA Direct Debit in the Euro zone) frequently have restrictions on multiple attempts, thus it follows that they are retried fewer times than card payments. Merchants are less familiar with wallets and carriers billing, so there is less certainty around how frequently, if at all, these transactions are retried.

Max Do not Method 0-2 3-5 6-13 14-30 31+ allowed by know rules

Credit Card 19% 44% 19% 3% 0% 9% 6% 19% 45% 16% 3% 0% 10% 6% Prepaid 18% 41% 14% 0% 0% 5% 23% Direct Debit 36% 18% 14% 0% 0% 5% 27% Wallets 30% 17% 4% 0% 0% 13% 35% Carrier Billing 21% 14% 0% 0% 0% 14% 50% Figure 19: Maximum number of retries in a 30-day period by payment type

Industry Perspective: Recurring payments fail for a number of reasons, and it is important for merchants to understand why in order to reduce failures. Best practice strategies include optimizing retry strategies, using account updater where available, and proactively communicating to customers to ensure payment information is up-to-date. Merchants should also leverage their payment providers to help interpret response values and scheme rules to optimize their retry strategies, which would help reduce costs and increase conversion.

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4. Merchants Must Set Up the Appropriate Internal Payments Team and Processes 4.1 Due to increasing complexity and importance, payments functions are growing within companies

More and more, merchants view payments as a strategic initiative within their business, and many have started to allocate dedicated resources to payments management, as well as to payments operations and payments-related IT9.

Figure 20: FTEs by payment function

Merchants typically have allocated at least 1-2 full time equivalents (FTEs) to payments management, and a few other FTEs to payments operations. IT resources are trickier to quantify as some merchants have payments-dedicated IT teams whilst others have partly dedicated IT resources within a broader IT division.

More broadly, survey participants expected to see increased headcounts focused on payments over the next 12 months, with an increase of at least 0.5 FTE across each of the three main payment areas outside of fraud: Payments Management, Payment Operations, and IT/Technology. This highlights the fact that merchants increasingly realize the necessity and benefits of allocating resources to payments.

Figure 21: Breakdown of payment FTEs by merchant size Interestingly, whilst overall merchants report that they expect to increase the size of their payments teams in the next 12 months, those of larger merchants are generally expected to stay the same (except for Technology/IT), indicating that there may be efficiencies in a payments organization once merchants hit a particular size.

9 See Appendix 1.1 for the definition of each payment function as used in the survey.

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4.2 Varying payment team structure – is there a structure that is most effective?

Merchants report that the structure and organizational "location" of payment teams vary between merchant types and are dependent upon the organization of the company. Whilst we have no direct measure of a payment team’s efficiency, we can report on the distinctions between teams.

We see a variety of reporting structures, typically dependent upon whether merchants view payments financially, technologically, or as a customer-centric service. The most common structure appears to be payments reporting into finance, sometimes directly to the CFO. In this case, merchants see payments as a real revenue protection issue and a large cost of doing business, hence the rationale for reporting into the CFO.

Other merchants report payments into customer relations, technology, or in some cases directly to the CEO. Naturally, the location of payments within the organization tends to impact the group’s metrics and goals; finance often focuses on cost whilst groups that report into customer relations or business tend to be more focused on sales and new customers.

Merchants are split in their reporting structures of payment and fraud, with some merchants reporting both into one area, e.g. customer relations, whilst others separate the two, e.g. payment into finance and fraud into security. Teams that monitor fraud and determine strategy are generally centralized. When looking to establish new payment methods, payment teams may leverage in-market expertise but ultimately most merchants are making decisions centrally.

Industry Perspective: The structure and organizational "location" of payment teams will vary between merchants, but the key focus is to ensure teams are aligned with the structure of the business and have a defined role within the organization (i.e. finance or sales/distribution). At this stage, it is not clear if there is a unique "one size fits all" approach to this organizational issue. However, what is very clear is that "payments" need to be managed and therefore requires the appropriate quality and quantity of resources, irrespective of its reporting lines.

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5. Payment Providers Can and Should Be a Key Partner

The number of contractual relationships merchants have with payment providers generally varies according to the market. The table below shows the average number of relationships per market for each payment vendor10. On average, merchants in Europe report having more contractual relationships than North American merchants, again reflecting different levels of complexity around payments in each geographic location (e.g. more alternative payment methods and more cross-border sales in Europe). These results plus our interviews identified two divergent trends for payment providers:

Consolidation: Some merchants are attempting to lower costs and increase their efficiency by consolidating payment providers. However, there was a general agreement amongst most merchants that no single payment provider can serve all their requirements globally at this stage.

Disassociation: Other merchants are looking to increase their payments coverage and business flexibility with multiple contracts. At least one merchant has more than 5 PSP contracts for one market. Another merchant requires at least two PSPs per payment method to ensure a backup is always available.

Merchants tend to end up in one of these two groups based upon their overall business goals, their ability to secure and deploy resources to manage and implement payments, and their size.

Country Gateway/ Gateway - Acquirers Alternative Banks PSP Collecting Payment Providers United States 1.0 0.7 1.6 1.4 1.0 United Kingdom 1.2 1.0 1.6 1.6 1.2 Germany 1.5 1.0 1.9 2.2 1.4 France 1.5 1.2 1.9 2.1 1.0 Canada 0.9 0.8 1.6 0.9 1.1 Spain 1.6 1.1 1.9 1.5 1.2 Italy 1.5 1.8 1.9 2.0 1.1 Figure 22: Average number of relationships with payment vendors

As an additional note, merchants with unique needs have benefited from building certain capabilities in- house. At least one merchant has developed an internal payment gateway to support temporary surges in payment volume and remove uncertainty pertaining to an outside partner. This is certainly beneficial for merchants who consistently experience this activity (e.g. ticketing and travel merchants).

10 See Appendix 1.2 for the definition of each type of payment vendor as used in the survey.

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5.1 Multiple relationships increase the global reach for merchants

Reason Rank Order

Figure 23: Reasons for multiple relationships with payment vendors

The majority of merchants surveyed had multiple relationships with payment vendors. The key reasons cited were to increase their global reach, improve pricing, and increase authorization rates. It is unsurprising that global reach was the top reason, since the variety of payment methods and the perceived lack of truly ‘global’ PSPs mean merchants need more payment providers to serve more markets. Pricing is also cited as a key reason, particularly within North America. Another noted reason is to provide contingency in the event of downtime with any one provider.

Authorization rates are a key reason for merchants in Europe to have multiple relationships, and our interviews revealed that merchants have been successful at improving their authorization rates with more local acquiring relationships in some markets. Business resilience is largely cited by European merchants who likely contract with multiple providers to ensure backups for any unexpected events.

Merchants contracting with only one provider are much less common and largely located in North America. The key reason for this is to allow easier vendor management.

Industry Perspective: The number of PSP and acquiring relationships generally correlates with the number of markets served and the complexity of those markets. Merchants operating in the more complex European payments landscape tend to select multiple relationships since their perception is that no provider can cover all markets and the increasing number of payment methods. In any case, it is clear that merchants can and should collaborate closely with their payment partners to address the many challenges highlighted in this report.

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5.2 Cross-border vs. domestic payment transactions

Figure 24: Relationships with acquirers with cross-border or domestic license

For payment cards, using an acquirer with a domestic acquiring license enables transactions to qualify for domestic interchange and can help achieve higher authorization rates. The payments landscape in the U.S. enables more merchants to operate with a domestic acquirer. In Europe, where the payments landscape is more complicated, we see a larger percentage of merchants engaging in cross-border payments. This is likely due to the use of PSPs that enable support for multiple markets through cross-border links.

Authorization rates for merchants are impacted by whether acquirers are domestic or cross border in many cases. One merchant noted how it was seeing low authorization rates for customers from France and Germany with its main acquirer (headquartered outside of these markets). The merchant formed partnerships with local acquirers in both France and Germany, which significantly improved authorization rates. Domestic acquirers in some markets are typically better placed to deliver higher authorization rates than non-domestic acquirers.

Industry Perspective: When assessing PSPs/acquirers, it is important to understand their coverage of certain markets – cross-border or domestic – and thus decide upon a strategy that optimizes acquiring relationships based upon an overall business strategy for that market, including relative importance of the market, cost of local acquiring, and impact to authorization rates.

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5.3 Merchants are beginning to expect more from Payment Service Providers

Merchants’ expectations of the service delivered by their PSPs are changing. No longer is just enabling the facility to accept various payment methods sufficient. Merchants are looking for their providers to play a more consultative role, providing advice and expertise ranging from specific market knowledge and local cultural differences down to helping with rules and regulations for local payment methods. Merchants want their providers to work more proactively with them to help increase business and convert more sales (e.g. by providing relevant insights). Signing the contract for their services should be the beginning of a partnership, and merchants expect ongoing support for their business.

One key gap is reporting, which is a common issue raised by the survey respondents are eager for reports that are more comprehensive and easier to use. Whilst cost is the key consideration for some merchants in selecting their provider, some are willing to pay more if substantial reporting and consultative services are included. In the same vein, merchants are also increasingly looking for more benchmarking data from their providers to help them measure their business against their peers.

Future services that merchants mentioned (but less vocally) included the requirement for easier integration of payment provider software. Some merchants want better 3DS and DCC services that do not redirect consumers away from their websites. Other merchants want support from their PSPs to route transactions via the lowest cost method. Merchants also expect to be kept up to date with progressing technology. In a nutshell, merchants now expect an on-going and in-depth business relationship that increasingly goes beyond the "basic" payment acceptance piece.

Industry Perspective: There is a clear market need for more in-depth reporting and consultative services to help merchants optimize payments. Nevertheless, given the importance of payments to a merchant’s business, merchants do need to develop internal payments experts, since the subject is too important to rely purely on outside partners.

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6. Conclusion

This survey confirms that the complexity of payments today and in the future requires that merchants develop a clear payments strategy to support their business and grow revenue.

Whilst merchants are at a variety of stages in their ongoing process of optimizing payment acceptance, merchants that have yet to focus on the issue or that may want to review their progress could undertake a three-step process in order to identify, prioritize, and monitor opportunities for improvement.

Step 1: Where Are You Now? Conduct a 360° payments diagnostic  The first step is to complete a diagnostic of the current situation covering all payment acceptance topics (payment acceptance policy, internal organization and processes, relationships with payment partners) and, where applicable, the issuance of payment methods (e.g. gift cards, co-brand cards).  The outcome of this first step should be a list of improvement initiatives.  Through the MRC, merchants have the ability to access experts and network with peers and service providers to learn first-hand how their operations stack up against others and where opportunities may lie within their companies.

Step 2: Where Do You Want to Go? Define a payments optimization plan  Based on the outcome of the above 360° payments diagnostic, merchants will need to prioritize the (possibly long) list of potential improvement initiatives and produce a payments optimization plan.  This plan should include topics like revenue increasing initiatives (such as a clear roadmap of new payment methods to be accepted in key markets) and cost reduction initiatives (such as optimizing payments relationships to increase authorization acceptances, and fine-tuning fraud prevention policies and tools).  The MRC offers many tools and resources to help merchants in this stage, including an extensive educational agenda (including its annual conferences), an array of roadshow and networking opportunities, a comprehensive library of articles and publications, and webinars and surveys that help provide insight into best practices.

Step 3: Are You Getting There? Establish on-going monitoring and management  Once the payments optimization plan is in place, it is important to set up the right internal organization and tools to measure payment performance.  This should include a cross-functional "payments committee" (or an internal payments organization), and tools such as a payments dashboard with relevant KPIs and regular review meetings with payment partners.  The MRC is working to develop a comprehensive set of benchmarking tools and datasets to provide merchants with a relevant and reliable set of data that uses standard definitions. Surveys such as this one and the Global Fraud Survey are early steps in an ongoing process to develop a robust set of benchmarks.

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Appendix 1. Definitions 1.1 Payments team structure For the purposes of the survey, the functions and departments related to payments were grouped as follows: Payments Management  Overall responsibility for payments  Definition of payments strategy ( of payment methods, availability, etc.)  Maintain relationship with payment schemes and vendors  Liaison with other internal functions like finance or product management Payments Operations  Reporting  Exception processing  Refund processing  Updating recurring payment information Technology and IT  Management of payment system infrastructure  Responsible for payment security (including PCI)  Maintain/establish connections to payment vendors 1.2 Payment vendor definitions The following definitions were used to describe each type of payment vendor in the survey: Gateway/PSP: These companies help merchants enable a variety of payment methods in their webpage. They do not normally acquire the payments themselves but work with acquirers and alternative payment schemes to offer a large variety of payment methods in one place. These companies do not usually get involved in merchant settlement (i.e. they do not touch the funds). Gateway – Collecting: This is a variant on the PSP concept; in this case the third party can collect money and then disburse it to the merchant. Some traditional PSPs are moving toward this model, so there may be some overlap between categories. Acquirer: These players, typically banks, enable payment acceptance for the merchants, usually this includes credit/debit cards and other traditional payment methods. They hold a direct relationship with the merchant and can help set up/manage dedicated merchant accounts for disbursement of funds. Alternative Payment Scheme: Enable payment acceptance via non-traditional methods, i.e. not credit/debit cards nor bank transfers. Bank (excluding acquirer): Any financial institution used for banking services, including cash management and initiation of bank transfers. This category does not include financial institutions only used for acquiring services.

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2. Survey Demographics

This section contains an overview of the demographic profile of the 114 merchants that responded to the 2014 Global Payments Survey.

Figure A 1: MRC membership

Subscriptions & Others Services

Travel & Tickets

Digital Goods

Physical Goods

Figure A 2: Primary source of sales

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< $25M $25M – $100M $100M – $1B > $1B N/A

Figure A 3: Annual ecommerce sales volume

Low Medium High (<10% YoY) (10%-50% YoY) (>50% YoY) N/A

Figure A 4: Average 3-year annual sales growth rate

<$25 $25 – 100 $100 – 250 > $250 N/A

Figure A 5: Average ticket size

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One-time Recurring Both N/A

Figure A 6: Transaction type

Online Channels Physical Channels Mentions Xx% = merchants 59% -mobile that selected the 42% -tablet channel 95% 49% -mobile 29% -tablet

56% 33% 24% 13%

Figure A 7: Sales channels

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In which regions do you have a localized ecommerce website or Mentions websites (local website, language, etc)? 82% 100 Xx% = merchants 90 that selected the 72% channel 80 70 60 45% 50 93 38% 40 82 30 25% 51 19% 20 43 28 10 22 0 North Europe Asia Pacific South/Central Middle East Africa America America

Figure A 8: Localized websites by region

Country Mentions in Top 5 Region

United States 76 North America United Kingdom 58 Europe Germany 49 Europe France 45 Europe Canada 26 North America Spain 23 Europe Italy 22 Europe Netherlands 13 Europe Australia 12 Asia Pacific Brazil 8 South/Central Am. Switzerland 5 Europe Mexico 5 North America Poland 5 Europe Sweden 5 Europe Belgium 4 Europe Turkey 4 Europe Japan 4 Asia Pacific Denmark 3 Europe China 3 Asia Pacific Austria 3 Europe Russia 3 Europe Other Countries (with 1 or 2 mentions) 17

Figure A 9: Countries in respondents’ top 5 markets by revenue

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