Contents:

The ePayments and eBanking Market Outlook Competitive advantage and new profit opportunities in a rapidly developing European market Executive Summary 10 European eBanking overview 10 Online consumer payments 11 Electronic Bill Presentment and Payment 12 Prepaid cards 13 Online security 14 Chapter 1 Report Introduction 18 Report structure 18 European eBanking overview 18 Online consumer payments 18 EBPP 18 Prepaid cards 18 Online security 19 Chapter 2 The European eBanking Overview 22 Summary 22 Introduction 23 Analysis by channel 23 The Internet 23 The innovation curve 24 Internet as a banking channel 26 The bank branch 27 The future of the bank branch 30 Other channels 30 Call centres 30 ATMs 31 iDTV and mobile banking 31 Functionality enhancements 32 Conclusions 32 Account aggregation 33 Animated online agents 35 Attitudes and behaviour of customers who bank online 36 Is the Internet reaching maturity? 38 Time spent online per week by European consumers banking online 39 Internet usage 40 “I am in a better financial position than most people my age” 42 “I am very worried about the state of my personal finances” 43 Actionable recommendations 45 Competition 46 Customers banking online with major Internet banks and banks providing Internet banking services 47 Egg: case study 47 Forecasts to 2007 50 Money transfers 52 Money transfer facilitators 52 Conventional banking money transfer systems 54 Emerging consumer money transfer instruments 56 Online wallets: PayPal 56 ATM withdrawal 58 Yahoo! PayDirect International 59 Chapter 3 Online Consumer Payments Overview 62 Summary 62 Introduction 63 Consumer online behaviour 63 Payment solutions 67 Credit and debit cards 67 Security initiatives 68 Visa 68 Mastercard 69 Prepaid online payment methods 70 P2P payment solutions 71 eWallets 72 mPayments 73 Chapter 4 EBPP – Electronic Bill Presentment and Payment 76 Summary 76 Introduction 77 EBPP – electronic bill presentment and payment 77 The biller-direct approach 77 The biller-direct process 78 The consolidator process 79 What does the future hold for EBPP? 81 The market context 82 Advantages arising from EBPP 84 Proportion of customers paying their bills online 85 Chapter 5 Prepaid Cards Analysis 88 Summary 88 Introduction 89 Prepaid products 89 Overview of prepaid cards 89 The teen population 90 Unbanked customers 91 Customers who do not possess credit cards 91 Customers with bad or no credit history 92 Extra advantages from prepaid cards 92 Types of prepaid cards 93 ePurses 93 Why have some ePurses failed where others have succeeded? 94 Examples of ePurse schemes 94 Examining teen prepaid cards 94 Smartcreds and Splash Plastic 96 Gift cards 97 Travel cards 98 Virtual prepaid cards 99 Conclusions 99 Chapter 6 Online Security: Combating Fraud 102 Summary 102 Introduction 102 Card scheme security initiatives 103 The UK: the largest eCommerce market in Europe 105 Growth of eCommerce 105 Online card fraud 106 Card not present fraud 107 Fraud related costs 108 EMV standard 109 Conclusions 110 Chapter 7 Appendix 112 Definitions 112 List of Figures Figure 1.1: Number of people per bank branch in the big five European markets, 2002 10 Figure 2.2: Positioning the Internet on the diffusion of innovation curve 25 Figure 2.3: Potential of channels to deliver sales, service, advice and transactions 27 Figure 2.4: Number of people per bank branch in European markets, 2002 28 Figure 4.5: The biller-direct model requires customers to view and pay their bills directly through their service provider’s website 78 Figure 4.6: The ‘consolidator’ model relies on central aggregator to present bills and provide payment capabilities for customers through its website 79 List of Tables Table 2.1: European Internet banking customer numbers, 2000—2002 24 Table 2.2: European Internet banking customers per capita, 2002 24 Table 2.3: Number of branches in Europe, 2002e-2005f, by country 28 Table 2.4: Number of people per bank branch in European markets, 2002 29 Table 2.5: Penetration of Internet access devices in surveyed European markets, 2002 36 Table 2.6: Internet access points in surveyed European markets, 2002 37 Table 2.7: Time spent online per week by European consumers banking online 39 Table 2.8: Time spent online per week by European consumers who do not bank online 40 Table 2.9: Use of the Internet for financial services and leisure purposes by European consumers 41 Table 2.10: European consumers who bank online who state that the Internet is their preferred channel over which to purchase specified product or service 42 Table 2.11: The opinions on their financial position of European consumers who do bank online: ‘I am in a better financial position than most people my age’ 43 vii Table 2.12: The opinions on their financial position of European consumers who do not bank online: ‘I am in a better financial position than most people my age’ 43 Table 2.13: The opinions on the state of their personal finances of European consumers who do bank online: ‘I am very worried about the state of my personal finances’ 44 Table 2.14: The opinions on the state of their personal finances of European consumers who do not bank online: ‘I am very worried about the state of my personal finances’ 44 Table 2.15: European consumers who do not bank online who state that the Internet is their preferred channel over which to purchase specified product or service 45 Table 2.16: Customers banking online with major Internet banks and banks providing Internet banking services 47 Table 2.17: Egg’s customer numbers, December 1999 to December 2002, UK only 48 Table 2.18: Targets and assumptions: La Carte Egg 49 Table 2.19: European Internet banking customer forecasts, 2003f-2007f 51 Table 2.20: European Internet banking technology spend, 2001-2005f 51 Table 2.21: Examples of cash collection money transfer providers 54 Table 2.22: Examples of providers of international drafts and money services, other than banks55 Table 2.23: Examples of providers of wire money transfer services, other than banks 56 Table 2.24: Examples of international online account-based money transfer providers 57 Table 3.25: Percentage of consumers that have accessed the Internet from specified locations during the last 12 months 63 Table 3.26: Percentage of consumers engaging in specified activity online during the last 12 months 64 Table 3.27: Percentage of consumers that have engaged in specified online activity during the last 12 months 65 Table 3.28: Percentage of consumers stating that the Internet is their preferred channel for purchasing specified product or service 66 Table 3.29: Percentage of consumers that made online purchases via specified means 66 Table 4.30: Proportion of customers paying their bills online 86 Table 5.31: Teen population in Europe, 2002 91 Table 5.32: Examples of ePurse schemes in Europe and the United States 94 Table 5.33: Examples of issuers of travel cards in the United States 98 Table 6.34: Visa EU eCommerce sales volumes year-on-year growth, Q4 2001-Q4 2002 and Q1 2002 and Q1 2003 104 Table 6.35: Percentage of consumers who have researched and ordered products and services online in surveyed European markets, 2002 106