Blog article
See all stories »

E-invoice and direct debit as online payment

When meeting merchants who offer services online, most of them one day ask is there any other option than card based systems, where fees run up to 2,5 % or even 4 % per transaction. Of course there are other options but card payments are most common and accepted world wide.

Sometimes I have wondered for example if Amazon could offer me e-invoice or direct debit because that is my favorite online book store. They know my preferences already and my habits to order books every month. How about if they could offer me e-invoice to pay once a month of all orders. To my understanding, that could save their transaction fees and make nice little revenue of trusting some of their loyal customers.

To promote e-invoice, have you any ideas or examples where merchant is offering e-invoice or direct debit when ordering online?

11148

Comments: (9)

A Finextra member
A Finextra member 31 January, 2011, 08:24Be the first to give this comment the thumbs up 0 likes

Hi,

There are a few retailers offering something along these lines however they are generally offering the Direct Debit alongside an account facility. A good example would be "Next" http://www.next.co.uk/directdebit.asp They are offering ebilling alongside Direct Debit.

Regards, Gavin Lawrence.

Jan-Olof Brunila
Jan-Olof Brunila - Swedbank - Stockholm 31 January, 2011, 09:04Be the first to give this comment the thumbs up 0 likes

Dear Antti,

The main hazzle on offering e invoice or even ordinary invoice is getting paid. At least in a global mass market. Cards are a global standard and the business model gives the merchant payment guarantee upon meeting admin requirements on the transaction. It also forwards the payment to merchant from merchant bank and thereby the merchant has received the funds in most cases prior to the cardholder paying out the funds from his bank account. These two items, payment guarantee and next day settlement are difficult to match for any e invoice scheme. The direct debit has a 2 - 3 day settlement time for merchant  but does not give payment guarantee and also requires the customer to trust the merchant to pull monies from a current account. Also it is today still predominantly domestic. The international merchant would have to sign up for multiple solutions and keep bank accounts in multiple countries. This is why payment cards dominate consumer e commerce payments.

A Finextra member
A Finextra member 31 January, 2011, 10:16Be the first to give this comment the thumbs up 0 likes

Dear Jan-Olof,

of course card payment is secure, but there is heavy price tag on it too. What I see option for e-invoice/ direct debit is local merchant where I shop every day. They know me and for them loyalty itself is a value. If they can lower their transaction fees and offer some other payment options, it would be good.

That use to be case, when I was young. My parents got once a month total payment slip from merchant and paid it on time. For global business, e-invoice can be hard, but not possible.

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 31 January, 2011, 11:19Be the first to give this comment the thumbs up 0 likes

Amazon has been offering Bill Me Later (BML) as a standard payment method. While not positioned explicitly as an e-invoice, BML displays many attributes of one viz. deferred billing, consolidated billing, once a month payment just like electronic payment of utility bill, and so on.  BML has been a regular feature of Amazon USA for over 2-3 years although I'm not sure if it is offered outside the USA. 

A Finextra member
A Finextra member 31 January, 2011, 11:26Be the first to give this comment the thumbs up 0 likes

I had similar idea about 3 years ago, when read about Bill-me-later service, but add e-invoice as online payment option. 

If companies want to increase usage of e-invoice, then online payment option should be one thing to consider.

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 31 January, 2011, 12:12Be the first to give this comment the thumbs up 0 likes

@Antti:

You select BML as the payment method on Amazon checkout page, visit BML's website, complete a short form, return automatically to Amazon checkout page with an approval (75% probability), Amazon confirms your payment and readies your goods for shipment. All this happens in around 45 seconds.

I'm not sure if I understand your comment correctly, but the above illustration clearly establishes that BML is as much an online payment method as a credit card. 

Jan-Olof Brunila
Jan-Olof Brunila - Swedbank - Stockholm 31 January, 2011, 12:46Be the first to give this comment the thumbs up 0 likes

Dear Antti,

In the local market closed loop payments work well but in the bigger market one is dependent on payment infrastructure since payer and payee normally do not have their accounts in the same bank. The Swedish on-line payment works for domestic e-commerce if customer and merchant have bank accounts in the same internet bank. So if an e-commerce merchant wants to adress everybody he needs to have accounts in multiple banks and also have multiple technical set-ups. For tiny Sweden only.   In the global context the card schemes are therefore the best game in town. In the Euro area the Sepa credit transfer and direct debit will makes it easier but this Sepa infrastructure lacks the risk mitigation offered by cards. The cost of card payment will be resolved by competition between banks, card schemes and other payment providers in the unified single Euro payment area.

A Finextra member
A Finextra member 31 January, 2011, 13:08Be the first to give this comment the thumbs up 0 likes

Bill-Me-Later works only in States, not in Europe. Similar idea with European wide e-invoice would be nice.

What comes to e-debit offered especially in Nordics are really nice. There money is in account same moment purchase is made. Only but is, there has to be several accounts in several banks for merchant. 

For globally card schemes are good, but it looks like there are two level of companies. One is merchant who acts globally and accepts only global payment solutions. Then there are companies who act locally, but accepts payment methods locally. This is a niche where fro example some online payment aggregators act.

There will not be one payment option, but several. Some are local, some are global.

Nick Collin
Nick Collin - Collin Consulting Ltd - London 31 January, 2011, 14:35Be the first to give this comment the thumbs up 0 likes

iDEAL in the Netherlands is a good example of a non-card e-commerce payment scheme.  Several other countries have similar schemes, eg Giropay in germany, and are apparently quite successful.  Cross-border payments are more difficult, but I believe there are plans to link up these schemes via agreements between ACHs within SEPA.  And non-card payment schemes such as Faster Payments in the UK would get round the delayed payment problem.

Having said all this, I still think card payment is the bset option for e-commerce, especially if Remote Chip Authentication combined with 3D Secure is used for high security - eg MasterCard CAP + SecureCode is now used widely in Belgium.

Retired Member

Member since

19 Mar 2009

Location

Blog posts

5,774

Comments

6,121

This post is from a series of posts in the group:

Payments strategies 2015-2020-2030

Payments systems visions, strategies, trends, pilots, forecasting, and planning for the short-, medium-, and far-term.


See all