educational

Bright Future for E.U. online Processing

Alex Henderson
The more that American webmasters do business in Europe, the more they realize that Europe and the U.S. are two very different environments when it comes to payment methods for adult websites. Continental Europe and the British Isles have long been major producers and consumers of adult online content, but their payment preferences set them apart from American consumers—and the webmasters who are the most knowledgeable of European payment trends will be the ones who do the most business overseas.

Europe has a long list of companies that specialize in online payment processing; companies that have enjoyed considerable success catering to payment processing needs in European adult markets include, among others, the Barcelona-based CommerceGate, eMerchantPay (based in Newcastle, England) and the Germany-based Payment Network AG (known for their popular billing program DIRECTebanking.com). Sascha Winkler, executive director of strategy for Payment Network AG, is fond of saying that when you break it down, there are four main methods of paying for adult content online: credit cards, debit cards, e-wallets and online banking transfer systems—and in Europe, credit card payments account for only a minority of online adult sales.

Raphael A. Berkien, business development manager for the alternative payment solutions provider 2000Charge, stressed that adult webmasters who hope to do a lot of business in Europe need to understand that as a rule, Europeans and Americans differ considerably when it comes to using credit cards. Berkien, who grew up in Holland, said that the U.S. is credit card-centric in a way that European countries are not. Berkien pointed out that in the U.S., millions of consumers use credit cards for most of their purchases (both online and brick-and-mortar), and credit cards remain the dominant payment method among American consumers of adult websites. But in European e-commerce, Berkien said, credit cards are way behind other payment methods.

“Germany is a perfect example [of a country] where direct debit payments are a more popular payment option than the usage of credit cards for online purchases,” noted Berkien, who went on to say that “Germany is a less credit-driven society than the U.S.” and that “as a cultural habit, Germans and many other Europeans are used to paying for items when they have the funds in the bank — and as such, a variety of online direct debit payment methods are offered, separated only by brand name and methodology.”

Berkien added: “In other countries such as the Netherlands, where chip cards are a popular payment method in the brick-and-mortar space, domestic processors have developed technologies that allow usage of the same chip card for online payments.”

Bjorn Skarlen, manager of business development for CommerceGate, observed: “Payment trends in Europe vary from country to country. For example; in Spain, phone billing is still the most common form of payment. Another payment method that is very common in Europe is direct debit, which is used a lot in Germany as well as in Austria, the Netherlands, the United Kingdom and Spain. In France, for example, where SMS for online payments is forbidden, debit card payments are very common. A lot of payments in the French online market are made with their local debit card Carte Bleu.”

But while non-credit card payments still dominate European adult e-commerce, Skarlen is seeing some increase in adult online credit card use in Europe—especially northwestern Europe, but other parts of Europe as well. “Credit card use is on the increase throughout Europe, and using credit cards to pay online is becoming more popular,” Skarlen said. “Since it is a convenient form of payment, people are taking to it more and more, as confidence and trust in the security of online payments increase.”

E-wallets are another payment option in Europe, although Winkler considers them problematic and prefers online bankbased payment methods—which is Payment Network AG’s focus. Winkler said: “You could think about using an e-wallet, but these payment methods still rely a lot on credit cards themselves,” adding that “a payment method is only cheaper than credit cards if it’s not connected to them.”

Although the euro isn’t the only currency used in European e-commerce, it remains the dominant one. Berkien estimated that in Europe, about 78 percent of non-credit card adult Internet payments are in euros. Roughly 12 percent, Berkien estimated, are in British pounds, and the remaining 10 percent are in various currencies that range from Swiss francs to Scandinavian currencies such as the Swedish krona.

“Europeans are used to managing different currencies; in the Internet space, there is no difference,” Berkien explained. “However, the preference, of course, is to be able to pay in your own domestic currency or at least to see the total transaction amount in your own currency. In addition, paying in a foreign currency often includes a surcharge and/or a currency exchange fee. Therefore, paying in your own domestic currency via a domestic payment option you trust and are familiar with is preferred. Because the euro has been adopted by 16 of the 27 European countries, it has made it a little easier for noneuro currency holders to compare prices across the countries and to possibly see the advantages the euro offers.”

Skarlen observed: “Most companies selling to the European market as a whole, rather than to specific countries, use a euro pricing model. However, they also tend to make use of Internet payment service providers that offer processing in local currencies to the countries that are not part of the Euro Zone. By doing this, they get more business from non-euro countries than they would if they only offered processing in euros.”

Berkien is optimistic about the future of adult Internet billing in Europe, where he believes that online billing in general will only become easier thanks to the European Payments Council’s Single European Payments Area (SEPA) initiative—which calls for the creation of a zone for the euro in which all electronic payments are regarded as domestic rather than international.

“Europe is and has been going through some major changes recently in the way payments are structured due to the unification of technology and rules mandated by the Single European Payments Area initiative,” Berkien said. “The future looks bright for Europe, as SEPA is unifying the payment space and the inter-operability is breaking down the borders and barriers of domestic payment methods—which includes online payment methodologies. Payment providers and processors will have to compete in a larger arena and can no longer depend on their domestic advantages, as the market will be open to payment solutions from other European countries.”

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