This week in the Bloggosphere and beyond … I’m out of bed early today, so it’s another bumper issue week, with a focus on the payments industry and how it is coping with the global economic crisis, and the knock-on effects to online retailers and auction sellers.  There’s a heavy emphasis on how US consumers, businesses, and financial operators are affected due to the global knock-on effect of the US economy on world markets.

The Federal Reserve’s Role in Retail Payments – Stuart Weiner of the Federal Reserve Bank of Kansas City has published an article titled “(Adobe pdf format) The Federal Reserve’s Role in Retail Payments: Adapting to a New Environment” in the bank’s fourth quarter Economic Review publication.

The U.S. retail payments system is in the midst of a transformation. The shift from paper to electronics, the emergence of new instruments and payments channels, the rise in non-bank participation, the change in risk profiles—all are elements of this new landscape. The Federal Reserve takes as one of its mandates fostering a payments system that is safe, efficient, and accessible. How does the Federal Reserve fulfil this mandate in this new environment?

As a background read to much of the data below, Mr Weiner’s article may prove useful.

Bloggosphere

Skip McGrath’s newsletter this week is one of the best I’ve seen for a while.  In it he discusses topics such as – Giving your eBay listings a New Year’s tune-up, does an eBay store make sense for small sellers, and jumpstarting your eBay sales with simple quick videos.  All his usual topics are covered as well, including a round-up of new wholesale sources.

AuctionBytes‘ recent survey (of readers) results regarding multi-channel selling behaviour are in.  Most respondents had different pricing strategies per venue and are more likely to set higher prices on Amazon and eBay, and lower prices on their own websites, online store fronts or off-line venues.

Also from AuctionBytes, online sellers who make or resell children’s items have been concerned about a new law designed to protect children from unsafe products. The Consumer Product Safety Commission (CPSC)
issued guidance on Thursday intended for resellers of children’s products as well as thrift and consignment stores.  The campaign against the new law, which will severely and adversely affect small businesses in the handmade children’s goods sector, has been actively promoted by Etsy for some months now.  The new law has been heavily criticised for being pro-mass manufacturers and anti-home industries.

Randy Smythe’s been getting value from his tin-foil hat (his admission not mine) discussing an eBay “top” executive guest speaker for the Internet Merchant Association’s conference in Boston in June.  Seem’s eBay is playing coy with who it will actually send, and Randy’s wondering if that’s because job security is a little loose nowadays.

The new eBay feedback policy revisions for cross-border transactions (the in-listing Customs declarations and feedback removal bits) have pulled the bloggospere big names over to the WhineSeller blog for an emerging discussion on the topic – fair play Hillary, I’m sure the rest of us are as confused as you are about the motives behind this.

Discussions & Forums

This last week in the BuildaSkill Forums -

• Category structure changes – January 2009 (eBay Australia) - The change list is HUGE – read it – I suspect every seller is affected.  eBay.com also updated the US category list.
• ePN at Affiliate Summit West 2009 in Las Vegas to give a presentation on Quality Standards in Affiliate Marketing on Tuesday from 2:00pm-3:00pm: Session 8b.  They also announced that the January payment is expected to be sent out a few days later than usual.
• eBay (Australia) introducing change to the Feedback Removal Guidelines that will help protect sellers from negative or neutral feedback relating to fees or delays as a result of international trade.
• eBay.com is to add two new services to its permitted payments list. Moneybookers and Paymate will be permitted for US sellers from February.
• Story in the Daily Telegraph, about how parents no longer read old-fashioned fairy tales to their children – discuss it in the Home & Families board.

International Money Matters

US Consumer Credit declined dramatically in November – The latest G.19 Consumer Credit data released by the Federal Reserve shows that US consumer credit decreased at an annual rate of 3.75% with revolving credit declining at an annual rate of 3.5%.  CreditCards.com reports that the decline is the largest percentage drop since 1998 and the largest ever decline in dollar terms.

Meanwhile, Reuters is reporting that Fitch Ratings latest report on US consumer credit for December indicates that credit card defaults rose with charge-offs up 31 percent compared to the same month a year ago.  In addition, monthly repayment rates on outstanding credit card debt declined 246 basis points sequentially from November to 15.96%. “The outlook is gloomy, as consumers struggle with a deepening recession and the highest unemployment rates in 15 years.”

The Discover U.S. Spending Monitor fell for the fourth consecutive month in December, declining more than three points to a new low of 76.6 (based out of 100). Both components of the monthly spending index – consumer confidence in the U.S. economy and consumer spending intent – reached new lows during the month, as concerns about the economy may be weighing on post-holiday spending plans.

US Unemployment rises to 7.2% – A jobs report from the US Department of Labor reported a loss of 524,000 non-farm jobs during December, resulting in an unemployment rate of 7.2%, the highest since 1993, and up from 6.8% in November. This goes some way towards explaining the underlying trend in the financial data in circulation.

In an article titled “Erosion in Retail Sales Slowed a Bit in December“, Stephanie Rosenbloom writes for the New York Times that MasterCard Advisor’s SpendingPulse data show that the declines in sales levelled off at about 20 percent in December – and that it was “the first time in a long time that we had numbers that were a little better than the previous month.”

Shell Oil Products USA has announced that it has launched the Shell Saver Card – saying it is

“the first gasoline retailer to make an electronic check payment method available to consumers nationally. This latest Shell payment option provides consumers with a convenient way to pay for purchases with a direct link to a checking account and savings on each gallon of fuel pumped at Shell stations.”

This may impact upon online payment systems auto-funded from buyer’s cheque (checking) accounts in that it could reduce their willingness to commit further debits from their bank balance.  A lot depends on the take up rate of the Shell Saver Card with regard to the degree of impact it creates in such a manner.

US Credit Card Issuers Reduce Online Marketing Efforts – Maria Aspan wrote for the American Banker that US credit card issuers have not only been cutting back on direct mail solicitations but, as of November, most of the major US issuers had reduced their efforts to source new accounts from online lead generation sites and online advertising.  This bodes ill for the adoption (by buyers) of the new integrated payment options in the eBay checkout flow, which will begin appearing this quarter – they are primarily credit and debit card accepters.

US Credit Card Issuers Willing to Deal Over Consumer Debt – In an article titled “Credit Card Companies Willing to Deal Over Debt“, Eric Dash writes for the New York Times that “even as many banks cut consumers’ credit lines, raise card fees and generally pull back on lending, some lenders are trying to give customers a little wiggle room.” Industry experts say there’s never been a better time for consumers to try to negotiate a partial payment on their debt with their credit card issuers.

Europe - CSC has announced that it has formed an alliance with direct debit solution provider Sentenial to offer a Single Euro Payments Area (SEPA) direct debit software-based payment solution. According to CSC,

“the offering will enable European banks to provide corporate and public sector customers with a comprehensive SEPA direct debit service ahead of the November 2009 target date set by the European Payments Council. SEPA is an initiative of the European banking industry that aims to make cross-border electronic payments as fast, secure and efficient as domestic payments within one country.”

SEPA was first covered on BuildaSkill (in our International Transfers & Payments Forum) in October 2007.  The general benefit of SEPA for small businesses is that Europe-wide bank transfers will cost the same as domestic transfers in bank fees – in many cases this will mean they are free, and remove the need for services like PayPal when they are used purely because the transfer is international.

UK - Barclays has announced that its customers will-

“soon be able to pay their way with the wave of a card as the bank is set to be the first in the UK to roll-out contactless VISA debit cards to its customers. From March, most Barclays debit cards that are issued or reissued will have contactless technology built in as standard. More than three million customers are expected to be using contactless debit cards by the end of the year.”

Although there is no immediate effect foreseeable on Internet merchants from this technology, in the long run, the follow-on may be that due to easier off-line purchasing, online transactions could slow (particularly if account balances take a hammering in bricks and mortar stores).

Emerging Markets’ Money Matters

India is on the very edge of having every banking customer both possess a debit card, and be able to use it without charges at any ATM of any bank anywhere within the sub-continental nation.  Their central bank has also finalised the guidelines for enabling every mobile phone user to send small payments via SMS and for the nationwide roll-out of mobile banking services according to an article in India’s The Economic Times.  It doesn’t stop there – moves are afoot for convergence of those technologies in 2009, simultaneous to a new banking clearance facility that will take a huge leap towards making paper payment clearances redundant.  As the article writer mentions, this will facilitate a huge growth in Internet-related transactions, and in the start and growth on internet merchant numbers.

India Pay - Domestic Card Payment Processing in India – In an article titled “Card processing work to shift to India“, India’s Business Standard reports on India Pay, a new payment system planned to start next year.

Sources said over the next four to five years, processing of credit card transactions, which is so far done abroad will shift to India. Sources at the Indian Banks’ Association … said that India Pay will handle all domestic transactions while it will work with payment networks like Visa and MasterCard for international transactions undertaken by Indian cardholders or foreigners on visit to the country.”

The article also mentions National Payment Corporation of India, a new company established by nine banks to focus on “electronics payments, ATM transactions and processing of card payments.” News of this nature may explain why eBay and eBid have ramped up presence in the sub-continent, and represent opportunity for all online sellers.  The growth in India’s wealthy middle class has been phenomenal over the last decade.

The online edition of Malaysia‘s Star newspaper has revealed some interesting statistics concerning web use in its country.  In an article lauding the growth of online banking within Malaysia, there is a small graph demonstrating the real problem with internal spam emails.  Malaysian web users are facing internally generated spam at double the level of that generated from outside the country.  In September 2008, Malaysians received 39 locally generated phishing emails for every 10 received from outside the country.

That’s seriously worrying.  Could this be a reason for eBay MY removing PayPal as a payment option late in 2008?

Online Channels & Venues

Etsy have left payment worries alone this week and instead have updated essential seller data access to details such as Item Status and Shipping Address in their Sales Data CSV Download.   This is available from the “Sold Orders” page in Your Etsy.  Downloaded as a comma delimited file (CSV) it shows orders for your Etsy shop.  These updates will provide Etsy sellers with better information on the status of orders, and provide a means to export shipping addresses for bulk shipping, bringing the product to a single location compared to the multiple locations required to collate the same data on eBay.

Etsy have also announced they will be discontinuing their Etsy Labs series of classes in order to concentrate on the website itself.  They are handing over training to 3rd Ward who already have collaborated on other training and classes projects.  In a related but separate announcement, they have also announced improvements to Etsy RSS feeds in both the back end and the user interface.

Niche venue Games2Trains.com have distributed a newsletter to explain their new requirement for a US $3.00 ID verification fee to be deducted from Seller’s PayPal accounts.  It seems the new site owners (as we blogged last year) believe all the hogwash PayPal issue about them being a safe service and verifying buyers and sellers details etc.  As any experienced and professional eBay seller knows, PayPal rarely undertake any worthwhile verification of users – as many of the horror stories in eBay’s own discussion boards reveal.

Games2Trains say the $3 fee is fully made available to sellers for offsetting against site fees.  Sorry guys, not buying into that one – eBay used to use the “give us a short term loan” fee-harvesting method (on Cheap Listing Days), and had to abandon it due to seller protests – save yourselves the hassle and find an alternative verification system – for both buyers and sellers.

Suppliers & Services

Authentify has announced that HSBC has deployed Authentify’s services to protect online and remote transactions from fraud. According to the company,

“HSBC, the world’s largest bank by asset size, is using Authentify’s services to automatically authenticate online users attempting certain transaction against HSBC accounts. The out-of-band process requires user or transaction specific details to be entered via telephone, separately from the Internet side of the exchange. The process isolates the authentication from Internet threats making it more difficult to tamper with an account even if armed with compromised identity information.”

This service appears to be similar in practice to the eBay Seller Identity Verification system launched last year, in that it requires both secure online login, and offline telephone verification.

My thanks to Ina at AuctionBytes for the tip-off that payment service Moneybookers have announced financial results for the year ended December 31, 2008. Account holders are up 55 percent to 6.2m, and transaction volume up by over 300 percent to 3 billion Euros.  Online merchants offering the Moneybookers payment system rose to over 30,000, and Moneybookers expanded worldwide reach to offer over 60 local payment options in more than 200 countries, up from 35 in 2007.   Over six million people now hold a Moneybookers eWallet account, up from the four million reported at the end of 2007.

MoneyBookers have long been my favourite PayPal alternative (although Henrietta at RedInkDiary appears to have a vitriolic distrust of them – I wonder if she’s ever tried using them?), and these results are fantastic news for both the company, and those of us who have held faithful to them during a long, slow rise from obscurity.  I am sure they will benefit hugely from the forthcoming integration into the eBay checkout flow.

Webifying

OpenX, our very favourite website toy tool, was nominated for The 2008 Crunchies Best International award. The Crunchies is the second annual competition and award ceremony designed to recognise and celebrate the most compelling start-ups, Internet and technology innovations of the year.  The announcements were due live on Friday night (9th January) but as yet, neither the OpenX site, nor the Crunchies site has been updated with the list of winners – shocking behaviour from Internet companies – what?

Looking Ahead

One of the trends I have noticed in researching for Sunday Papers this week, is that there is a definite move by financial companies away from credit based plastic, towards debit based plastic.  For online small businesses, this may result in wider access to payment processing services with fewer charge-backs due to credit limits being exceeded.  It will also represent a challenge in getting customers to part with a portion of their ever-more pressured cash-in-hand balances, as opposed to freely accessible new credit balances.  Promotional pricing and special offers are going to be a big part of online retail success in 2009.  Are you ready for it?

Ed