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CMSPI – IAC State of the Industry Report
CMSPI – IAC State of the Industry Report
Section 3 Overview Understanding Ecommerce In Sections 1 and 2, we discussed the fundamental logic that underpins the payments ecosystem: who is involved, what they do, and how they are paid. However, payments managers know once transactions go from the cash register to the online environment, the similarities may as well stop there. Online payments often exhibit vastly different costs, fraud risks and approval rates to their in-store counterparts. To differentiate between them, an industry distinction has emerged: the one between Card Present (CP) and Card Not Present (CNP) transactions. While a consumer may instinctively know the difference between online and in-store shopping, use cases like in-store kiosks, Buy Online Pick-up In-Store, and QR code payments are blurring the distinction between the two – potentially with huge implications for merchants. In this section, we explore the world of online payments, starting with analysis of the growth of ecommerce in focus markets since 2019. Then, we take a deep-dive into the definitions and technologies that make Card Not Present payments so complex. The Questions • Four years on from the start of the COVID-19 pandemic, how has ecommerce evolved? • What is the difference between a Card Present and Card Not Present transaction, and why does the classification matter? • Where does tokenization come in?
The Findings • While global ecommerce grew in 2022, its growth rate has slowed relative to previous years • Countries like Australia, South Korea, Japan, and Chile are experiencing the sharpest impact globally as ecommerce growth comes to an abrupt leveling or even retraction • The channel classification of a transaction sits with the branded card network • Whether a transaction is Card Present can have a significant impact on its cost, risk and likelihood of approval • Ecommerce transactions are more expensive to accept on average The Numbers • 41% The estimated growth in the share of ecommerce across the countries analyzed between 2019 and 2022 82 • $2.4 billion The estimated increase to interchange and network fees paid by U.S. merchants due to increased ecommerce spending between 2019 and 2023 83 • 67% The share of Europe’s ecommerce attributable to Western Europe 84 • 55% How much cheaper it is for merchants to accept a debit card than it is to accept cash in Sweden 85 • 45% How much South Korea’s POS market shrank between 2019 and 2022 86
82 CMSPI analysis of the Worldpay Global Payments Reports (2020-2023) 83 CMSPI estimates and analysis 84 https://www.eurocommerce.eu/app/uploads/2023/09/2023-european-e-commerce-report-light-version- final-19-sep.pdf 85 CMSPI analysis of data from the Kansas City Fed 86 CMSPI analysis of the Worldpay Global Payments Reports (2020-2023)
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