Page 1 Meet you there Lycos Europe, Sven Krahn – 25./26.04.2006 Direct Response Forum – Basel,...

Meet you there

Lycos Europe, Sven Krahn – 25./26.04.2006

Direct Response Forum – Basel, 25./26.04.2006Direct Response Forum – Basel, 25./26.04.2006

Case Study: Direct DebitCase Study: Direct Debit

Sven KrahnSven Krahn

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Lycos is one of the leading European portals.Lycos is one of the leading European portals.

Top 5

Top 10

Other

Introduction to LycosIntroduction to Lycos

Results from a Roland Berger Ranking of Top-Brands

Source: Manager Magazin Online 2002

Rank 1Coca Cola

Lycos Rank 32

T-Online Rank 42

MSN Rank 77

Amazon Rank 83

Marlboro Rank 94

BMW Rank 115

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International businessInternational business

Introduction to LycosIntroduction to Lycos

T-Pay

bank-/post-/autogirot

4B MasterCard Debit

4B Maestro DebitVisa Electrón Debit

Premium SMSPremium Rate

Numbers

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Challenges for LycosChallenges for Lycos

• Multi-Service Billing (for all the different Lycos Premium Services)

• Integration (bring all the different bills on one invoice)

• Service bundles, packages (apply price and discount plans to a set of services)

• Flexible pricing (transparency and visibility to user AND product manager)

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Integration means to bring the charges for all Integration means to bring the charges for all premium services to one consumer invoice.premium services to one consumer invoice.

Challenges and Challenges and requirementsrequirements

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We require core competency within each We require core competency within each module.module.

Lycos Core Billing Lycos Core Billing PlatformPlatform

usage/orders

Core BillingPlatform

customer data

invoices

1. Premium Services

signup CDB

Lycos Sign Up

2. Sign up andcustomer database

3. Customer Care

T-Pay

Account receivables, debtor management

4. Payment processing

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Importancy of Direct DebitImportancy of Direct Debit

Germany and Netherlands are direct debit Germany and Netherlands are direct debit countriescountries

Offline bank transfers are fully substituted by Direct debit.

Target group has no credit cards.

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Pros and Cons of Direct DebitPros and Cons of Direct Debit

Customer Merchant

Pro

sC

on

s

• 100% coverage (Everybody has a bank account)

• Control of the payment date• Fast (payment notification after 2-

4 days)• Low costs (per transaction fee)

• Very common for all types of recurring payments (utilities, subscriptions, membership fees, …)

• Secure and simple• Customer-friendly chargeback

policies

• Some countries require very complex mandate handling (fulfillment) procedures

• High chargeback risk• Long revocation periods• Easy to fraud

• Customers need to control debits on their accounts

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Pre-authorized direct debit

• The payer (debtor) pre-authorize the debit of his account on the initiative of the beneficiary (creditor)

• Legal framework between five parties:

- Creditor and creditor‘s bank- Debtor and debtor‘s bank - clearing house or payment supplier

(optional)

• The different systems operate on basis of three contracts:

- agreement between all participating banks- agreement between debtor and creditor

mandate- agreement between creditor and his/her

bank

The ‘mandate issue’The ‘mandate issue’

Germany is an ‘easy’ Direct Debit countryGermany is an ‘easy’ Direct Debit country

Non pre-authorised direct debit

•No mandate before the direct debit process actually occurs•The creditor has to present the collection instruction to the debtor as a request for authorization•After authorization by thedebtor, the debtor’s bank will execute the direct debit •Possible revocation period of 6 weeks for the consumer without stating a reason

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Bank information is ‘public knowledge’Bank information is ‘public knowledge’

• Algorithms check are available from the Federal Bank of Germany http://www.bundesbank.de/zahlungsverkehr/zahlungsverkehr_pruefziffernberechnung.php

• Valid sort codes (Bankleitzahlen) are available as well http://www.bundesbank.de/zahlungsverkehr/zahlungsverkehr_bankleitzahlen_download.php

• For fraudsters, it is easy to get “real” bank information that will pass any of the algorithm checks

• For customers it is very easy to make a chargeback

• Internet Merchants need additional customer validation, e.g.

- PIN (SMS or bank statement)

- phone validation

- address verification

- initial active fund transfer by customer (prior to direct debit)

• Algorithms check are available from the Federal Bank of Germany http://www.bundesbank.de/zahlungsverkehr/zahlungsverkehr_pruefziffernberechnung.php

• Valid sort codes (Bankleitzahlen) are available as well http://www.bundesbank.de/zahlungsverkehr/zahlungsverkehr_bankleitzahlen_download.php

• For fraudsters, it is easy to get “real” bank information that will pass any of the algorithm checks

• For customers it is very easy to make a chargeback

• Internet Merchants need additional customer validation, e.g.

- PIN (SMS or bank statement)

- phone validation

- address verification

- initial active fund transfer by customer (prior to direct debit)

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Summary and conclusionSummary and conclusion

Direct debit is a MUST for Lycos Europe Direct debit is a MUST for Lycos Europe

Direct debit is perceived as the most consumer-friendly and “secure” payment method in DE and NL.

Direct debit (DE and NL only) makes 30% of all our European payment methods.

Direct debit ranks up to 85% in DE and NL.

Relevant parts of our target groups do not own a credit card (credit cards are not common in Germany)

Other countries (besides DE and NL) have too complex requirements and/or direct debit is not so popular

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