Since the birth of e-commerce in 1994, numerous systems have been devised for processing payments online. As the industry prepares to enter its 10th year, there is still no standard system or product set in use across the board.Some systems are designed to facilitate only the conducting of a transaction, others the fulfilment, and others the processes in between. Some serve the consumer and some the merchant, while others are designed to connect one of the parties in the transaction to the bank or credit card company.
In South Africa, a fierce competitive battle has been waged over the past six years for control of the stretch of cyberspace between the click of a Buy button and the conclusion of the transaction in the merchant’s bank account.
This space, referred to in this report as the online transaction processing environment, has become a critical area of competitive advantage for banks attempting to attract merchants to their merchant acquiring services.
The market is dominated by home-grown products, with a few foreign partnerships and imports also playing a role. Nedcor leads the field in number of merchants acquired, the majority of which are acquired through the iVeri transaction processing, while Postillion, a system for switching online transactions to a bank through a proprietary network (i.e. not across the Internet) has increased Nedcor’s market share as a result of its use by newly acquired subsidiary BoE. Standard Bank is the second biggest player in this environment, while both First National Bank and Absa have strong positions, but still lag far behind. The total market consists of just more than 1300 merchants using online transaction processing systems in South Africa.
The survey defines online transactions are those payments specifically initiated through the use of a payment instrument such as a credit card to make a purchase.
There is presently no easily definable way of measuring total number or value of Internet or e-commerce transactions, since merchants are not required to specify the nature of transactions. Although credit card associations have mandated that all credit card transactions on the Internet carry an Electronic Commerce indicator (ECI) code, this does not occur in practise. With the introduction of new authentication systems by MasterCard and Visa, the card associations will be able to measure precisely the transactions processed via the Internet, and thus promote a more definable, measurable and serviceable transaction processing environment.
The widespread adoption of such systems will no doubt spur the take-up of e-commerce, as it is intended to remove some of the risk still inherent in online transaction processing. In regard to online transaction processing systems, however, this will merely require adaptation, and does not pose a direct threat.
“The key to the success of online transaction processing systems lies in the extent to which the solutions are geared towards acquiring the best merchant mix possible, within a bank’s strategic parameters,” says Arthur Goldstuck, MD of World Wide Worx and project leader for the research. “Depth of the solution provider’s relationship with the bank is a critical aspect, but must go hand in hand with width of product environment and breadth of transaction type.”
The leading providers have shown that they are able to meet all three of these central criteria.
Contents of the report
“Online payment facilitation in South Africa, 2002” comprises an in-depth examination of electronic transaction processes in South Africa, comparing traditional electronic transaction processing with that in the online environment, and presenting the first detailed, generic model for understanding the flow of online transaction processes. It outlines the competitive landscape in this latter area, and shows market share of merchants acquired by bank and by solution. The report is accompanied by a features matrix showing how each of the respective banks’ solutions compare with each other in terms of functionality.
Other content includes:
- Traditional Electronic Transaction Processing (overview and diagrams)
- Credit Card Transaction Processing (overview and diagram)
- E-Commerce Electronic Payment Processing (detailed analysis and diagram)
- Technology Providers – Partners Or Competitors?
- Security Versus Simplicity; Fraud Prevention
- The South African Landscape: Market Share; Threats
- The Future Of Credit Card Payment Facilitation
- The Payments Processing Matrix (spreadsheet):
- Bank’s Relationship With Vendor
- Vendor’s Relationship With Bank; Product Environment
- Transaction Type; Authentication; Merchant Solution
- Competitive Insight
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