Analysts predict electronic payment gateways will provide the confidence boost needed to entice more people to purchase from the Net. David Hellaby reports on how the growing demand for safe gateways is a potential goldmine for innovative resellersRecent statistics show that, despite Australia having more personal computers per household than almost any other country in the world, and with a healthy number of them connected to the Internet, Australians are reluctant to purchase goods over the Net.
Quite simply, these potential consumers are concerned about security. Many have yet to be convinced they can safely put their credit card details online.
Last year, only 5 of the 28 per cent of local households connected to the Internet purchased or ordered goods online for private use. According to the Australian Bureau of Statistics, a similar proportion used the Net to pay bills or transfer funds in the February quarter. However, there are signs that attitudes are changing rapidly. The Commonwealth Bank announced in June that it had signed up its 500,000th customer to use its online banking facilities. Of those, 100,000 had joined in the last nine weeks of monitoring.
Electronic bill generation and payment is also starting to boom and online merchants are hoping that the take-up of online financial transactions will flow through to purchasing online.
This change in attitude will result in some excellent opportunities for developers and channel partners who can secure partnerships with the growing number of payment gateway solution providers.
Australia is rapidly becoming a leader in the development of secure and effective gateway software. Companies such as QSI Payments, Camtech and Pure Commerce have carved an international niche for their products and are ready to take advantage of the predicted boom.
Albert Pang, research manager for analyst IDC's eCommerce Software program, notes that while buying products over the Internet with a credit card has become a common occurrence in many countries, in Australia, viewing the credit card bill and submitting a payment to settle it electronically is still considered a novelty.
"This will change, however," said Pang, "as electronic bill presentment and payment products become more sophisticated with the inclusion of features such as secure e-mail delivery, and as the technology becomes increasingly implemented in business-to-business [B2B] e-commerce."According to IDC, the real opportunity in this market rests with transaction-based revenues, which will skyrocket from $US700,000 in 1999 to $825 million in 2004. "Much of this growth is based on the potential use of electronic bill presentment and payment to replace the sheer number of paper bills circulated every year," said Pang.
IDC estimates that in the US alone, 1.5 billion bills are sent to consumers each month, covering 18 billion transactions and generating nearly $US6 billion in processing fees a year. However, only a portion of these transactions will be handled by electronic bill presentment and payment systems. "Consumers initially will be resistant to this technology. People tend to be overly cautious when it comes to embracing new ways to handle their personal finances.
"This is a market still in its infancy, but it has the potential to blossom into a staggering opportunity," Pang said.
In their most basic form, payment gateways carry confidential financial transactions (usually credit card details) from the merchant to the bank for authentication and back again. Transactions can be completed in between three and 30 seconds, depending on what is required, and are carried out over a secure encrypted link.
While most transactions are carried out over the "fixed" Internet, a growing number of companies are offering gateway solutions that can handle mobile Internet transactions using wireless application protocol (WAP).
Web developers, resellers and other partners collect revenue either by reselling the product with an added margin or receiving a share of the transaction fees charged on all transactions, or a combination of both.
Camtech, a company which evolved from the University of Adelaide in the 1980s (the name is short for Campus Technologies), is now well established in the payment gateway market and is providing opportunities for developers and resellers to profit from the boom.
Camtech sales and marketing manager Andrew Weller said the Camtech E-Commerce Payment Service could be set up on a merchant's site in as little as 10 minutes and several of the company's Web developer partners were now offering facilities for WAP transactions.
He said digital certificates would be available for WAP soon, however, Weller also warned that while boom times are predicted, Australians are currently still reluctant to buy online.
"A lot of customers [up to 60 per cent] abort purchases before the transactions are completed. They may just be tyre kicking' to see what a site has to offer."Weller said many Internet shoppers still wanted to deal with a person rather than with just a site. Consequently, call centres are becoming an important part of merchant sites.
Anecdotal evidence suggests that consumers often felt more secure providing their credit card details over the phone than online. In this instance, the gateway sat behind the call centre and acted as a link to the authorising bank or credit card company.
"We are in the process of working out a system with Link Communications to allow merchants to direct their customers to a call centre where they can provide their credit card details over the phone or make payments through organisations such as BillPay," Weller said.
The Camtech business model was developed using channel partners. The company operates a value-added reseller program that enables Web developers, advertising agencies, technology providers, ISPs and others to become e-sellers and derive an annuity revenue stream, said Weller. To date, Camtech has more than 140 channel partners.
By comparison, Sydney-based gateway Pure Commerce is a relative newcomer. It began as a startup at Sydney's Technology Park incubator in 1997 and has since developed into an international company.
Communications manager Amanda Mason said Pure Commerce could allow companies to accept credit card payments in more than 150 different currencies and settlement could be made in any of 32 different currencies. Pure Commerce has signed up clients such as NextEd, Watches Online, Web Watchers and a number of overseas businesses.
According to Mason, the company offers two levels of partnership. "The first is a strategic partnership where Web developer, e-commerce consultants or software developer companies get Pure Commerce products at a wholesale rate and can then sell them on or integrate them into their packages. The other is an alliance partnership where companies get a commission for referring clients to us."The company launched a WAP service two months ago but Mason said there were still a few factors that had to be further developed with the service. "We are trying to form relationships with the different telcos so that our merchants can have access to consumers using WAP," she said.
Mason expects WAP will make up quite a large component of Pure Commerce business in the future, especially as the company moves into Asia where there is a high uptake of cellular devices. Currently, however, there are still so many factors needing to be resolved between all of the different parties involved in a mobile transaction that WAP is not viable at the moment. "Costs for WAP are quite high for the consumer, so I think it will be a while before it is viable for the consumer," said Mason.
Brisbane-based gateway QSI Payments scored a major coup last year when MasterCard adopted its gateway for the Asia-Pacific region. Since then the company, started by John Richards four years ago, has gone from strength to strength and has signed up financial institutions both in Australia and overseas.
Richards said the gateway infrastructure was typically installed in banks and financial institutions. Merchants use a payment client that allows them to send a request for authentication to the gateway. The process is coded using industry standard encryption, which varies according to the package being used.
Richards said the company planned to open a training program called the QSI University of Payments as part of its channel partner program. "It will concentrate entirely on training our partners to install our solutions into banks and so on. We will also be educating the Web development community and have dedicated an entire floor of our new Brisbane headquarters to the University."Under QSI's reseller program, the company aimed to drive demand into the gateways it provided to the financial institutions by targeting Web developers, hosting organisations, Internet service providers, application service providers and application developers. "We collect the transaction fees and share them with the people who brought us the business in the first place and who will bring us more business in the future.
"We looked at wholesaling out transactions to the channel but decided it was easier to do it ourselves because we are in MasterCard and have access to the direct entry system. We can therefore build billing mechanisms that are quite easy to administer," he said.
Unlike some of the other gateway providers, GPayments does not charge a transaction fee. Business development executive Steven Dujin said the company concentrated on providing the technology and, unlike Camtech, did not act as a bureau collecting transaction fees. However, he said the company was always looking for partnership opportunities and was willing to consider any business model.
GPayments is a spin-off from Creative Digital Technology and was formed to focus on global payment technologies. It now has some of the most advanced multi-payment gateway, merchant solutions, digital wallet, and electronic bill presentment and payment technology in the market.
The company provides solutions for financial institutions, transaction hubs, merchants and consumers operating from any Internet-enabled device and is now moving into the mobile payments market with its digital wallet technology.
Gold Coast-based Internet security company Eracom is a good example of the sort of organisation that can profit through a partnership with a payment gateway provider. The company provides digital encryption hardware, and is now launching its own payment gateway project. According to chief executive officer Michael Hargreaves, every time someone uses an eftpos machine in Australia, there is a 97 per cent chance that the data will be authenticated by Eracom hardware. The company sees moving into payment gateways as a natural progression.
"Basically, we are going to be putting our encryption card into gateway servers," said Hargreaves. "We will be providing a high-speed encryption card and digital signatures where necessary." Ironically, the company is likely to take its technology to Asia rather than team up with one of the local gateway developers.
Hargreaves said the local market was not yet mature enough. "There is still a perception here that you do not need hardware for security, whereas in Europe and parts of Asia it is taken for granted. Visa specifies that you must have hardware security," he said.
While the gateway market is still in its infancy, it is growing rapidly and offering opportunities to development partners and resellers. At the recent Internet World exhibition at Sydney's Darling Harbour, several gateway companies, including eMatters, SecurePay, bankengine and eway were showing their wares and seeking channel partners.
Despite the recent fall from favour of dot-com companies on the world stock exchanges, the Internet economy is far from dead and with secure payment gateways boosting confidence in online transactions, it may finally realise its potential.what's new from . . .
Camtech offers a variety of customised services, depending on the client's needs. Its products include the Camtech E-Commerce Merchant Server software which provides a connection between the cardholder and the bank, financial institution or other authorising agent. Credit card or other payment details are secured by eWallet or SSL Certificate and sent to the payment gateway that links the authorising bank or organisation to the Internet and, if necessary, transmits the transaction from the merchant's bank to the buyer's bank.
Visa and MasterCard have developed a standard for ensuring the security of e-commerce transactions called secure electronic transactions (SET) and Camtech is participating in the development of a SET compliant service.
One of Australia's longest established payment gateway services, the company has agreements with numerous credit card companies and banks including Visa, MasterCard, American Express, Diners Club, Bankcard, JCB, Westpac, National Australia Bank, Commonwealth, ANZ, BankWest, Bank SA and St George. It offers the highest degree of encryption of any of the gateways - up to 1024-bit.
Camtech charges a $5000 sign-up fee, which includes training for an unlimited number of staff for a full day and certification of the site operating the company's payment gateway service.
Camtech also offers opportunities for revenue sharing through transaction fees or wholesaling Camtech products.
Cantech: (08) 8303 3300http://www.camtech.com.auPure CommerceThe Pure Commerce E-Business Suite enables a business in any country to establish an internationally competitive e-commerce site, with protection against cyber fraud. It comprises a comprehensive range of services including Pure Global Pay, which allows real-time, multi-currency Internet payment processing. Prices can be displayed in up to 150 currencies, local tax calculated automatically, and funds deposited anywhere worldwide. Pure Global Pay accepts all major credit cards, including Visa, MasterCard, Diners, Amex, JCB, Bankcard, as well as European debit cards. Alternat-ively, the company offers an Australian-only service called Pure Pay.
Pure Commerce's Fraudcheck system red-uces the risk of cyber-fraud to less than 1 per cent and offers insurance against it of up to $US50 million. An address verification system minimises delivery errors and goods can also be delivered digitally or electronically through its Pure Vend system.
The company recently launched a WAP service to allow financial transactions and purchases to be made over the mobile phone network. Although the service is still being developed, it is expected to provide a key revenue stream in the future.
Pure Commerce E-Business Suite startup costs approximately $1000.
Pure Commerce: (02) 9209 4709http://www.purecommerce.com.auQSI PaymentsQSI Payments is a relatively young company that is making an impression on the international market. It provides a range of secure e-payment solutions for a range of transactions over the Web. Its e-payments architecture supports a variety of payment gateways including credit, pin-secured debit, loyalty, purchase and stored value cards and the architecture is designed to enable seamless upgrades to new, emerging payment types such as the plug and play capabilities.
For the merchant, QSI provides a universal Payment Client that plugs in to the payment processor's selected gateway and can easily be integrated into common shopping cart applications.
QSI's enablement product Payment Registration Enabler (PRE) provides automated Web-based fulfilment tools for the bank, financial institution or credit card company to manage the deployment, merchant acceptance, and on-going risk management functions.
QSI has customers in both the bank and non-bank Payment sectors including MasterCard International, which uses QSI's secure payments architecture to provide the MasterCard Internet Gateway Service (MIGS) in Australia and New Zealand. The company also recently signed a contract to integrate its e-payments architecture with the Virgin Blue Airlines Open Skies flight booking system.
QSI's reseller program offers marketing and technical support, training and revenue sharing models.
Local pricing is available on application.
QSI Payments: (07) 3210 2522http://www.qsipayments.comGPaymentsGPayments offers a variety of services including a digital wallet called ActiveWallet; global payment processing through ActivePayment; a merchant client called ActiveMerchant, and a BillPay service. Each has a choice of configurations, giving the products considerable flexibility. ActiveWallet works with any Web site to facilitate online purchasing and is now available for Windows, Web browser, Palm Pilot, Windows CE and WAP.
ActivePayment is an e-commerce financial platform with a built-in multi-payment gateway. It supports the processing of a full spectrum of payments. It also forms an operating system for a range of optional payment-centric applications such as BillPay and ActiveWallet Server.
ActiveMerchant uses a single Internet connection to converge all online and offline payments and supports different business models to ease the transition to e-commerce.
It has multiple levels of encryption and allows aggregation of transaction processing and purchasing across the entire enterprise.
BillPay is a fully integrated electronic bill presentment and payment solution, designed to cater for both high-end businesses and consumers. It has the capacity to aggregate a variety of bills and invoices from multiple sources and present them in a consolidated format for the user.
GPayments does not collect transaction fees and does not offer revenue sharing to channel partners.
GPayments: (02) 9913 3088http://www.gpayments.com