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THE POWER OF PAYMENT METHODS: WHY ONLINE RETAILERS MUST ADDRESS THE CHECKOUT PROCESS

Jack Ehlers, Director of Payment Partnerships at PPRO

 

The retail industry has dramatically changed and continues to do so at a rapid pace. The days of bricks and mortar stores being a consumer’s only option are long gone.

 

Easy to navigate web pages, a wide variety of products to choose from and getting items delivered straight to your door all save consumers time, and in some cases money.

 

The combination of the death of the high street, and the instantaneous nature of buying goods has meant that shopping expectations have changed. Consumers demand immediacy and expect retailers to provide a seamless shopping experience. However, one thing that is too often overlooked is the payment process. This includes offering a wide choice or local and preferred payment methods for customers. If they don’t, they risk losing potentially loyal customers to competitors.

 

According to PPRO’s own research, 67 per cent of UK consumers[1] have abandoned an online retail site simply due to the payment process. Just over a fifth of these (22 per cent) left because the process was too complicated, while 21 per cent didn’t complete the transaction as the merchant didn’t offer them their preferred payment option. This demonstrates how important payment methods really are to the consumer.

 

It’s essential that consumer expectations around payment processes are addressed, but there are several aspects to consider:

 

Cultural differences when it comes to payments

When it comes to addressing consumer expectations around payment processes, it’s important to consider that preferences differ from country to country.

 

For example, consumers shopping in the UK prefer paying with PayPal (50%) and debit or credit cards (43%). In counties such as Germany, most digital buyers prefer payment on account and via direct debit. Merchants need to know exactly who is shopping on their site and accommodate their preferences.

 

Payment preferences vary just as languages do and when it comes to attracting global customers, the last thing merchants want is the method of payment to be the barrier to sales.

 

Picture the situation – a customer in Germany goes to a UK merchant’s site to make a purchase. They get through the perfectly translated front-end but when they reach payment they do not recognise any of the methods offered to them. The likelihood is they will abandon their basket and go elsewhere. Limiting payment options limits global reach, all the while extending a competitor’s reach.

 

To truly go global, merchants don’t need to just break down language barriers, but also payment barriers.

 

The risk for retailers who don’t offer alternative payment methods

Payments have come a long way since the advent of online shopping. Customers expect to be able to buy what they want, when they want, how they want. This was substantiated in our research study, which showed 90 per cent of UK consumers expect to have the option to pay by a number of means when they shop via the internet.

 

It’s no longer adequate to offer customers one single way of paying – in-store or online. Not everyone has a credit or debit card, so if this is all that’s on offer, merchants will lose out on sales from those who prefer to pay by an alternative method.

 

For example, the internet has introduced card-free methods, such as Pay Pal, which are in-keeping with the quick and easy style of online shopping itself. This simplifies the shopping experience for customers, as these types of payment methods mean customers no longer need to carry cash or card around with them to make a quick payment – they simply need to log in, enter their password and submit.

 

Imagine if a customer has an online basket worth hundreds of pounds but doesn’t have their credit card available at that moment. If they are unable to pay through an online payment method, that sale is automatically lost. It’s key to remember that if payment options are limited, so are sales opportunities.  

 

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Business

CAPITAL MARKETS – LIQUIDITY MANAGEMENT DURING COVID-19

COVID-19

Tony Farnfield, Partner at management and technology consultancy, BearingPoint

 

When “Dr. Doom” predicted the 2008 financial crisis back in 2006, and spoke of a necessitated market correction and was calling for the repricing of riskier assets; predicting a continuation of a global financial slowdown, or even a global recession starting in 2020, this prediction was based on known factors affecting the global economy. The unforeseen outbreak of Covid-19 and the increased volatility this has brought to global financial markets was not taken into account.

Three months on from the initial outbreak, and we have already witnessed the biggest intraday drop in the Dow Jones Industrial Average. The outbreak, coupled with the oil price shock, triggered responses from the Federal Reserve, the Bank of England and Central Bank of Canada to cut benchmarks rates in an effort to even out the shock to the wider economies.

There is a high degree of uncertainty on how the coronavirus crisis will unfold. We could experience only a temporary disruption – lasting from a few weeks to a few months, or a prolonged stress in markets, assuming that it will be months until vaccine clinical trials begin and with rate cuts (already reaching bottom) having limited effects on the required stimulus.

Banks have undeniably improved their liquidity following regulatory guidance post financial crisis; however, treasury departments will need to prepare and caveat for a wide range of possible outcomes. Traditional stress testing, scenario development and re-calibration have not taken into account conditions such as the ones experienced with the Covid-19 outbreak or the speed with which things evolved.

At a generic level, there are three key steps Treasurer’s should look to take:

 

  1. Convert uncertainties into emerging and quantifiable risks

This is already being considered by some of the larger financial institutions under their crisis management responses. However, it’s important to highlight that even for those that have triggered the crisis management process, the forecasting, rebalancing and risk assessment should be continuous, taking into account new developments in the following manner:

Continuous forecasting

Continuously monitor and develop scenarios of potential sources that could disrupt funding and liquidity usage. With the right analytical capability, cash-flow projections should adapt to changing scenarios, including scenarios coming from the different business lines. Scenario sources could include unexpected credit usage that could encourage either large prepayments or defaults, or changing corporate customer behaviour – deposit inflows from corporates and depositors affecting leverage-constrained institutions. Also, there should be some consideration given to the availability of funding sources or, for wholesale funding, acceleration or reduction of funding plans.

Continuous re-balancing

Take immediate actions in increasing liquidity and cash holdings in the short term to cover for the uncertainty.

Continuous risk assessment

Account for emerging risks previously not accounted for, such as the temporary closure of operations or reduced capacity of market utilities. Assess those scenarios and how these are captured and factored in stress tests. Intraday liquidity should be the primary focus to understand immediate cash requirements.

 

  1. Refine your liquidity risk measurement

Better identification, measurement and analysis of key liquidity drivers should become core for an institution’s ability to effectively manage and mitigate particularly unique risks not previously considered. To do this, Treasurers should consider the frequency of their monitoring, and increase levels to daily stress tests and daily Early Warning Indicator testing to include daily developments.

In-depth analysis of risks

Re-run your liquidity risk identification exercise to understand better your current exposures, especially examining certain instances of this outbreak crisis, e.g. oil-related exposures, airline, marine or supply chain related exposures etc.

Re-calibrate based on new understanding

Re-assess existing scenarios or add new scenarios in covering a range of events and timeframes (e.g. sustained spread of the virus over x months vs limited spread and containment). Revisit your Early Warning Indicators to monitor emerging risks. At a later point, revisit these to assess if market signals existed and if they were picked up by your indicators.

 

  1. Review your mitigation plan

Identification, assessment and measurement is only part of the overall response. Stresses or risks that can be crystallised need to be accompanied by mitigative actions, agile and feasible enough under the current market conditions. Contingency funding actions might need to be revisited to determine if additional actions need to be considered.

Revisit and verify the availability of near real time reports, such as positions of securities holdings reports. Such information should be readily available and synthesised in the event that you will need to communicate clear and concise plans to investors, regulators or other market participants in relation to liquidity management strategies to foster confidence in the market.

In summary, reviewing and preserving an institution’s liquidity under extreme and volatile circumstances is the core responsibility of any treasurer. However, we know that any scenario or contingency planning is unlikely to be fully predictive of unprecedented scenarios such as this. Re-visiting already set practices and testing their efficacy and completeness should be the first step before considering inserting new scenarios and new actions into the mix. Nothing tried and tested can always remain true.

 

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Business

STOP THE CONFUSION: HOW TO KNOW IF YOUR BUSINESS MAY BE INSURED AGAINST COVID-19

COVID-19

By Alex Balcombe, Partner at Harris Balcombe

 

The last few weeks has seen businesses in hospitality, tourism, retail, leisure and more forced to close their doors following the Government’s orders that they should close to prevent the spread of coronavirus.

While this is expected to flatten the curve and reduce the number of coronavirus cases, it will of course have an impact on businesses and employees alike.  For small businesses especially, there are many concerns about how they can claim on their insurance to weigh the fall of this impact.

 

Mixed Messaging

In response to calls to help struggling businesses, the Government has informed the public that companies who are facing turmoil will be able to claim on their business interruption insurance during this difficult time. For most, this is wrong.

Alex Balcombe

The insurance industry has also been extremely vocal that there is no cover for any coronavirus-hit businesses during this tough financial period. This isn’t strictly true either.

How can businesses see through the mixed messaging and best secure their future and their livelihoods and reduce money worries? It’s an extremely stressful time for many companies, and confusion over whether or not they can be covered can only cause more unnecessary stress.

Since it’s a new disease, most businesses will not be covered for business interruption due to COVID-19. In fact, the vast majority of policies do not cover anything related to COVID-19.

That said –  don’t rule out the idea that you may be covered. There is a chance that you will be covered against COVID-19, but not know it. This is a very small chance, but your current cover may already protect your business against the consequences of coronavirus, and the nationwide response to it –  though those with this cover are unlikely to realise it.

 

How Could I Be Covered?

Not everyone has business interruption insurance, as it’s not a legal requirement. It is entirely up to the policy holder to weigh up the benefits of having it, and their ability to trade should a disaster happen.

To be considered for cover for COVID-19, there are two types of policy extensions to your business interruption cover that can potentially cover you for this situation:

Infectious Disease Extension 

Many policies expressly state which diseases fall within the realm of being an infectious or notifiable disease. If this is the case, your policy will not provide cover. As it is a new disease, these policies will not have included COVID-19.

Other infectious disease extension policies will define the disease with reference to the actions of the government. Since the UK Government has named COVID-19 as a notifiable disease throughout the UK, it is possible that your business may fall into this definition, thus meaning you may be able to make a claim.

However, again, it’s not always that simple. Many policies require the disease to have been on your premises, while others specify a radius from your premises in order to qualify.

 

Denial of Access Extension (non-damage)

Denial of Access Extension (non-damage) policies may cover you if you’re prevented from accessing your property. This could be due to an event, or by the actions of a competent authority, which could cause your business interruption cover to engage.

If covered by this clause, there are often very subtle differences in wording in your policy. This could depend on the insurer or policy. You may well be covered, but it will depend on your particular circumstances, and the specific policy wording.

 

What now?

It’s clear that the Government needs to do more in ensuring there is clear messaging for businesses, and to help the insurance market look after policy holders. This is an unprecedented situation, and with many people looking to claim on their insurance, we’re already seeing major delays which could have a domino impact.

People throughout the world are understandably facing all kinds of worries because of the current pandemic. Our ways of living have changed, and many business owners will not have experienced a situation like this in their life times. If you own a business and are unsure about whether you can claim for business interruption, or are confused about ambiguous wording, get in touch with a loss assessor.

These claims are not simple, but loss assessors will be experts in business interruption insurance, and will specialise in large and complex claims. They will be able to help and guide you along the way, check your wording and work on your behalf to make sure you get everything you are entitled to.

 

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