Pago Report 2006: Important Trends in European E-payment

Effective fraud prevention helping to increase acceptance of E-commerce

Cologne, 8th May 2006 – Pago eTransaction Services, an Acquiring and Payment Service Provider, has just published its annual analysis of purchase transactions in European online shops in a unique e-commerce survey entitled “Trends in Consumer Purchasing and Payment Behaviour in selected E-commerce Industries 2005”. The study is unique because it is the only international e-commerce survey which is based on real-life purchase transactions and does not rely only on consumer polls. The 170-page report includes about 100 tables and nearly 100 informative graphs providing even more detailed analysis than its five predecessors.

The 2006 Pago Report is based on the analysis of some 50 million real-life purchase transactions processed through the Pago platform between 1 October 2004 and 30 September 2005. This represented a doubling of the transaction volume analysed compared with the 2005 Report. The report focuses on consumer behaviour and payment behaviour in European online shops include a look at the non-payment risks for online merchants serving European and international consumers. E-retailing, e-health, telecommunications and e-travel, all typical e-commerce industries were analysed in detail.

Chargeback ratios fall significantly

“The most pleasing news for online merchants must be the fact that chargeback ratios have fallen significantly,” said Dr. Markus Weber, Pago’s Managing Director, “The average ratio has fallen from 0.83% in 2004 to just 0.48% in the report period”. He added that this was also due to improved fraud prevention mechanisms in the card-not-present domain.

European e-commerce grew strongly too. Stabilisation of e-commerce and e-payment structures associated with growing consumer acceptance is causing a boom in e-commerce. “The period analysed in the 2006 Report, however, only hints at the beginnings of this trend. The number of transactions processed in Q3 of 2005 was significantly higher than a year ago.”

Other findings in the 2006 Pago Report

The Pago Report also contains other key facts about consumer and payment behaviour and on the non-payment risks for online merchants including:

• German consumers continue to buy predominantly in German online shops
• The percentage of Non-European consumers in European online shops has fallen by three quarters
• There is no clear seasonality in B2C e-commerce; monthly shopping activity varies little from the monthly mean average
  The slowest month we observed was October 2004, and the busiest was May 2005
• Thursdays and Fridays are the busiest shopping days. Very little is bought online at weekends
  German consumers are most active during the working lunch period; nearly one quarter of all purchases are made in this period (12 noon to 2pm)
• The share of female consumers in online shopping has remained constant at about one third, which is much lower than in 2003.
• The female percentage amongst consumers from the UK and from the rest of Europe is now only about 20% or lower.
• The busiest online shopping month for German men was easily February 2005; female consumers have become continuously more active since August 2005 with September 2005 being the busiest month for female consumers.
• The average transaction value of online transactions fell overall by 13.21€. Shifts in average transaction values were a result of changes in relative turnover amongst individual industry sectors.
  Female consumers generate higher transaction averages than their male counterparts. This was independent of the geographical origin of the consumer.
• Looking at all shops and consumers from all over the world, the credit card has lost ground in terms of online payment methods. In fact, this is really because  behaviour of German consumers within the telecommunications sector who make up such a large proportion of the transactions analysed and their disproportionate preference for payment by electronic direct debit.
• There were only minor shifts in terms of regional online shopping behaviour. German postal code regions 1, 4, 5 and 6 continue to head the rankings.
• There were major changes, however, in terms of individual areas (two-digit postal code areas). Top place was taken by area 45 (Essen/Gelsenkirchen) followed by 22 (Hamburg surrounds) and 63 (Offenbach surrounds).
• The share held by consumers from Eastern Germany (former GDR) remained almost stable.
• Nearly all consumers from the UK and from outside Europe still use credit cards for online payment.
• German consumers are increasingly using the electronic direct debit – over 60% of all online purchases are paid for by direct debit.
  Surprisingly, the share of offline payment methods in the e-payment market rose slightly. German women still like these payment methods, using them for 13% of their online purchases.
• The average transaction value of credit card transactions has fallen slightly to just on 48€.
• In terms of the major credit card brands, MasterCard gained slightly on Visa. The shares held by the other, minor credit card brands (American Express, Diners Club etc.) have also increased a little.
  Success rates for credit card transactions have risen generally and very significantly so for consumers from outside Europe.
• The average chargeback ratio has fallen overall to a very favourable value of 0.48%.
• The chargeback ratio for transactions by German consumers has risen, albeit relatively slightly to 0.42%.
• The highest chargeback ratios were recorded for transactions in the range between 100€ and 500€; the lowest chargeback ratio were found for transactions of over 500€.
• The percentage of e-retailing transactions fell considerably and online gambling’s share by almost the same amount.
• The most dramatic shift between the retail and the online gambling industries was recorded between February and March 2005.
• The telecommunications sector was stable whereas the e-health sector grew slightly.
• E-Travel turnover with travellers from outside Germany was very positive but bookings from German consumers were more hesitant.
• Online gambling is becoming very popular with the German consumer with the industry’s share growing by 2%.

The 2006 Pago Report can be obtained from the Pago Shop (www.pago-international.com/shop) for a subscription price of 375.00 Euro (plus 16% VAT), valid until 30 May 2006.