Fintech – nhân tố thúc đẩy thành công của thương mại điện tử xuyên biên giới (CBEC)

Nội dung text: Fintech – nhân tố thúc đẩy thành công của thương mại điện tử xuyên biên giới (CBEC)

1. FINTECH AS A KEY SUCCESS FACTOR OF CROSS-BORDERE-COMMERCE (CBEC) FINTECH – NHÂN TỐ THÚC ĐẨY THÀNH CÔNG CỦA THƯƠNG MẠI ĐIỆN TỬ XUYÊN BIÊN GIỚI (CBEC) Sang-Ryul Shim1 - Kwangwoon University Abstract Based on greater connectivity, higher levels of mobile Internet, improved tech-adoption, and greater trust in online spending, cross-border e-Commerce (CBEC) has now become very attractive and effective channel between sellers and buyers across the world. Especially, the wide use of smartphones accelerate the rapid growth of mobile CBEC, enabling consumers to shop anywhere, at any time of day, from any device, machine or channel. One of crucial success factors in CBEC is the availability of the right mix of payment methods. The most common payment is to use credit cards. However, consumers have concerns in depositing their credit card data online. Recently, Fintech, the convergence of technology and finance, is expected to provide more innovative, convenient and reliable alternative payment, and thereby promote CBEC more rapidly. Therefore, it should be noted that the recent issues and events in the field of CBEC and Fintech are not ‘fashion’ but ‘trend’ to be prepared for. Key words: cross-border e-Commerce (CBEC), mobile commerce (m-Commerce), credit card, fintech, alternative payment, threat of fraud Tóm tắt Do có tính kết nối lớn hơn, mức độ Internet di động cao hơn, tỉ lệ chấp nhận công nghệ gia tăng và lòng tin ngày một lớn đối với chi tiêu trực tuyến, thương mại điện tử xuyên biên giới (CBEC) giờ đây đã trở thành kết nối hấp dẫn và hữu hiệu giữa người bán và người mua trên toàn thế giới. Đặc biệt, việc sử dụng điện thoại thông minh ngày càng phổ biến đã thúc đẩy sự tăng trưởng nhanh chóng của CBEC di động, cho phép người tiêu dùng có thể mua hàng ở bất cứ nơi nào, vào bất cứ thời điểm nào trong ngày, từ bất cứ trang thiết bị, máy móc và kênh nào. Một trong những nhân tố chủ chốt dẫn đến thành công của CBEC là mức độ sẵn sàng của các kết hợp phương thức thanh toán. Phương thức thanh toán phổ biến nhất là thẻ tín dụng. Tuy nhiên khách hàng vẫn còn lo lắng về việc khai báo dữ liệu thẻ tín dụng trực tuyến. Gần đây, Fintech, sự kết hợp giữa công nghệ và tài chính, được kỳ vọng là sẽ mang lại phương thức thanh toán thay thế sáng tạo, thuận tiện và đáng tin cậy, qua đó có thể thúc đẩy CBEC nhanh chóng hơn. Do đó cần lưu ý rằng các vấn đề và sự kiện gần đây trong lĩnh vực CBEC và Fintech hoàn toàn không phải là ‘trào lưu’ mà chính là ‘xu hướng’ cần chuẩn bị sẵn sàng để nắm bắt. Từ khoá: Thương mại điện tử xuyên biên giới (CBEC), thương mại di động (m- Commerce), thẻ tín dụng, fintech, phương thức thanh toán thay thế, nguy cơ lừa đảo 1Professor, Dept. of International Trade, Kwangwoon University, e-Mail : srshim@kw.ac.kr 34
2. Introduction With the rapid innovation of ICT and Internet, electronic commerce (e- Commerce)has been a key word for more efficient, time-saving, cost-effective and transparent business, domestically and globally, in business-to-consumer (B2C)and business-to-business (B2B) transactions. Especially, the popular usage of smartphones and tablets allows end-users and consumers worldwide to move on mobile commerce (m-Commerce). They compare prices, discuss products and services with others via social media, select a web shop independent of its location and transfer payments via their PC, mobile phone or tablet at any place, anytime and anywhere. The number of Internet users was 35 million (0.6% of total world population) in 1995, but increased to 3.7 billion (49.6%) as of March 31, 2017,. The penetration rate of Internet users over its regional population shows some difference regionally; North America (88.1%), Europe (77.4%), %), Oceania/Australia (68.1%), Latin America/Caribbean (59.6%), Middle East (56.7), Asia (45.2%) andAfrica (27.7%).2 (See Table 1) Meanwhile, smartphones, mobile phones with more advanced computing capabilities and connectivity than regular mobile phones, came onto the consumer market in the late 90s, but only gained mainstream popularity with the introduction of Apple’s iPhone in 2007. The iPhone revolutionized the industry by offering customer friendly features such as a touch screen interface and a virtual keyboard. The first smartphone running on Android was introduced to the consumer market in late 2008.3 The smartphone industry has been steadily developing and growing since then, both in market size, as well as in models and suppliers. By 2017, over a third of the world’s population is projected to own a smartphone, an estimated total of almost 2.6 billion smartphone users in the world. Based on global use of Internet and smartphones, cross-border e-Commerce (CBEC) as international e-Commerce has become very attractive and effective channel between sellers and buyers across the world. It is getting smoother and faster, and cross- border payments are becoming cleaner. Merchants are not only more engaged in CBEC, but also are focusing on emerging markets more than ever before. According to the McKinsey Global Institute, the share of CBEC of total goods trade has grown from 3.0% in 2005 to 12.1% in 2012.4 The global e-Commerce market is expected to reach US$ 1.5 trillion, up by 20.2% from 2013. The average growth rate between 2012 and 2017 is estimated at 17.4% and the global sales in 2017 are expected to exceed US$ 2.3 trillion. 2Internet World Stats ( 3 Statista ( 4 McKinsey Global Institute, “Global flows in a digital age: How trade, finance, people, and data connect the world economy”, 2014.4. 35
3. Economic changes brought by CBEC have already had a large impact on the changing role of the regions in the global economy, for example, with e-Commerce markets in the Asia-Pacific region expected to surpass for the first time those in North America in 2014.5 As m-Commerce continues to explode globally, consumers now expect to shop anywhere, at any time of day, from any device, machine or channel. They expect the same experience from one touch-point to another. Today’s shoppers are unwittingly omnichannel. Nevertheless, CBEC is just a small detail in the entire multichannel consumer experience It needs to overcome some challenges such as localization, language, logistics, payment, laws and legislation to handle the complexities of operating globally. Therefore, this paper takes a closer look at the concepts, situation, challenges of CBEC and Fintech as alternative payment to cash, check, credit card, etc Table 1.Internet Users in the World by Geographic Regions (March 31, 2017) Population Penetration Growth Users World Population Internet Users % of Rate(% 2000- % Regions (2017 Est.) 31 Mar 2017 World Pop.) 2017 Table Africa 1,246,504,865 16.6 % 345,676,501 27.7 % 7,557.2% 9.3 % 50.2 Asia 4,148,177,672 55.2 % 1,873,856,654 45.2 % 1,539.4% % 17.1 Europe 822,710,362 10.9 % 636,971,824 77.4 % 506.1% % Latin 10.3 America / 647,604,645 8.6 % 385,919,382 59.6 % 2,035.8% % Caribbean Middle 250,327,574 3.3 % 141,931,765 56.7 % 4,220.9% 3.8 % East North 363,224,006 4.8 % 320,068,243 88.1 % 196.1% 8.6 % America Oceania / 40,479,846 0.5 % 27,549,054 68.1 % 261.5% 0.7 % Australia World 100.0 7,519,028,970 100.0 % 3,731,973,423 49.6 % 933.8% Total % Notes: (1) Demographic (Population) numbers are based on data from the United Nations - Population Division. (2) Internet usage information comes from data published by Nielsen Online, by ITU, by GfK, by local ICT Regulators and other reliable sources. Source : Internet World Stats ( 5 eMarketer (www.emarketer.com). 36
4. Concepts of cross-border e-Commerce (CBEC) Cross-border e-Commerce (CBEC) is commonly and narrowly defined as the process in which a retailer based in one country sells its products and services online to customers in one or more other countries. This term is generally understood but not always used. Other terms such as multiregional e-Commerce, global e-Commerce or international e-Commerce are used to describe the process in which retailers sell online to customers in other countries. However, it broadly encompasses both B2B and B2C aspects.First, B2B CBEC is linked to global e-Marketplaces like Alibaba, Kompass, EC21, PCPlaza, TradeKorea, etc., where exporters and importers post their e-catalogs and offers, search potential business partners, and negotiate their terms and conditions by e-mail. Under the current international trade or cross-border commerce regimes, the average B2B transaction between exporters and importers involves 60 or more distinct trade procedures6. According to World Bank, export transactions involved 2～11 documents and 6～86 days, whereas import transactions involved 2～17 documents and 4～130 days.7 Second, B2C CBEC is connected to global online shopping malls like e-Bay, Amazon, Taobao, Rakuten, K-malls, etc., which provides consumers with 24-hour access, greater choice for their desired consumer goods, easy ordering, diverse payment and delivery system. 8 They also offer simple and low-cost set up for merchants that are testing out new markets. The logistical hurdles of selling in overseas markets are lowered, such as warehousing, fulfillment, delivery and returns management are lowered. Most importantly, they give international retailers an open storefront, visible to high levels of local traffic. Therefore, B2C CBEC is growing drastically, as advancing technologies help reduce problems associated with international payments, long shipping times and language barriers, thereby making it possible to shop online anywhere and everywhere by any devices. Second, B2C CBEC is connected to global online shopping malls like e-Bay, Amazon, Taobao, Rakuten, K-malls, etc., which provides consumers with 24-hour access, greater choice for their desired consumer goods, easy ordering, diverse payment and delivery system. 9 They also offer simple and low-cost set up for merchants that are testing out new markets. The logistical hurdles of selling in overseas markets are lowered, such as 6 Andrew Grainger, “Customs and Trade Facilitation: From Concepts to Implementa- tion”, World Customs Journal, Volume 2, Number 1, 2009, pp.18-20. 7 WTO, “Trade Facilitation Agreement : Easing the flow of goods across borders”, 2014. 8 Park, Phil Jae and Kim, Jung Duk, “Cross-Border e-Commerce, Is it Silk Road or Mirage?”, Trade Focus, Vol.12 9 Park, Phil Jae and Kim, Jung Duk, “Cross-Border e-Commerce, Is it Silk Road or Mirage?”, Trade Focus, Vol.12 No. 40, Korea International Trade Association, 2013.7.12. 37
5. warehousing, fulfillment, delivery and returns management are lowered. Most importantly, they give international retailers an open storefront, visible to high levels of local traffic. Therefore, B2C CBEC is growing drastically, as advancing technologies help reduce problems associated with international payments, long shipping times and language barriers, thereby making it possible to shop online anywhere and everywhere by any devices. Today’s consumers have more choices and are more demanding than ever before. They can access all types of content at a click, all quickly delivered over a high-speed connection, and now expect to be able to buy goods and services through any channel at any time. As the world becomes increasingly connected, largely thanks to mobile Internet and improved technology, consumers are more comfortable browsing products from oversease- Marketplaces or online shopping malls. It also means that e-Commerce needs to tie into social channels such as Facebook, Instagram, and Twitter, and content needs to be localized and personalized. Expectations for customer service quality have vastly increased, and customer service needs to be proactive and prompt, rather than just passively responding to complaints when they arise. Having a successful domestic e-commerce business is no guarantee for international success, due to the additional complexities that expanding internationally entails. Because of these additional complexities, the framework for cross-border e- Commerce contains more challenges for retailers than domestic e-Commerce. These complexities include (i) multicurrency pricing and payments, (ii) different payment processing, (iii) fraud management, (iv) Customs duties and taxation, (v) Customs clearance, (vi) landed cost calculation, (vii) global logistics services, etc. (See Table 2) Table 2. Complexities of cross-border e-Commerce (CBEC) Content Details multicurrencypricing and While some currencies are widely familiar outside their home payments countries, such as the US dollar and the Euro, customers still expect and are more comfortable with seeing the purchase price in their home currency. different payment In some countries, credit cards are the norm for online purchases; processing in others, cash on delivery prevails. And along with payment processing comes a whole host of regulatory requirements and compliance issues that vary from country to country. fraud management Companies must make sure that payments are not made by unauthorized users of the payment method, such as a stolen credit card. Customs duties and Countries have their own taxation schemes and customs duties for taxation online purchases of goods and services. Many countries charge value-added tax, but the application of VAT varies depending on 38
6. different categories of purchases, even across countries that share the same currency, such as the Eurozone. Calculating the correct tax and duty is vitalto the customer’s online experience so that they know all the elements of the final price once they agree to complete a purchase. After purchase completion, those duties and taxes have to be accounted for on the back end as well, to flow back to the appropriate tax collection and customs authorities in each country. Customs clearance Before goods are shipped internationally, they need to be checked that they are indeed legally acceptable in the destination country and that all appropriate documentation requirements are met. landed cost calculation The “true” total amount a buyer will pay in addition to the product price. The landed cost calculation includes costs related to moving and handling freight, duties and taxes, brokerage fees, and some types of overhead. global logistics Having the right partners on the ground in the countries where customers will be receiving deliveries; partners that can meet required delivery dates, manage returns, and provide consistent tracking numbers so that buyers have visibility into where their order is from purchase to delivery. Source : Jill Finger Gibson, “Cross-border e-Commerce: A Maturity Roadmap and Partner Selection Guide“, Digital Clarity Group, 2014, p.6. There is no single starting point or one true path to CBEC success. In comparison to more traditional retailers who have alternative options at their disposal, a pure-play online retailer may lack knowledge of the new markets it wants to enter in addition to having to add on the capabilities to handle international orders. Depending on the country into which the retailer wishes to sell to online, the common step is launching its products via marketplace intermediaries, such as eBay or Amazon in the U.S., Alibaba Tmall in China, Rakuten in Japan, Ozon in Russia, and MercadoLibre in Latin America, K-mall in Korea rather than setting up a direct channel from Day 1. This allows the retailer to rely on the existing logistics network those marketplaces have, while learning about its new customer base’s preferences and tastes. This is also an option for physical retailers that lack their own online channel. In this sense, regardless of their starting point, retailers can refer to Digital Clarity Group’s maturity model for cross-border e-commerce, which provides a roadmap to maturity from the perspective of the customer’s experience.10 (See Table 3) 10 Jill Finger Gibson (2014), ibid. 39
7. Table 3. Maturity model of cross-border e-Commerce (CBEC) Content, product Payments, taxes Supply chain Customer support and pricing and fees Level 5 Optimized pricing and product Multicurrency with Global supply Multilingual global + local catalog adapted to all-in price at chain optimized to customer support different check-out; Variety improve in buyer’s local countries/regions of dominant international time zone via payment options returns: online to multiple non- with fraud store, store to integrated physical management in customer, and and digital buyer’s home other channel channels country; Choice of variations delivery options and simple returns Level 4Scaling to Multilingual content Multicurrency with International Multilingual global added for all most local taxes presence expands customer support countries; Little to and fees included online and possibly in buyer’s local no localization at purchase; physically in initial time zone, online Limited payment target countries or phone only and delivery options Level 3 Targeted Multilingual content Two to three International Bi- or multilingual expansion for top one to three currency purchases presence via third- customer support countries possible; Buyer party distributors in seller’s home pays local taxes and marketplaces country only and fees at delivery Level 2Experimen- Most content in Purchases from Cross-border Customer care in tation home country other countries in shipping solution seller’s home language only; seller’s currency, offers guaranteed country and home Some static content popular credit duty and taxes in language only such as shopping cards, and PayPal checkout cart translated into a few additional languages Level 1Ad hoc Content in home Pricing in seller’s All purchases Customer care in country language currency; Popular shipped from seller’s home only credit card seller’s home country and home payments available country; Buyers language only (VISA, pay duty and taxes MasterCard, upon delivery American Express) Source : Jill Finger Gibson (2014), ibid, p.10. 40
8. Status of cross-border e-Commerce (CBEC) In 2015, e-Commerce as an industry grew steadily. It was valued at used 1.67 trillion globally, a 25% increase on 2014. More than half of all global Internet users, i.e. 51.5%, purchasedgoods via a digital channel, and CBECmade up for21% of total global online trade. Chinese online consumer retail spending was USD 672 billion, nearly double that of the USin second place. The UK remains the third-largest market after China and the US, and sits firmly among the ‘Big Three’ markets that are driving global e-Commerce.11 According to the China Internet Network and Information Center (CNNIC), cross- border shopping is a fairly niche activity in China. Only around 5% of digital buyers had made a purchase from abroad in the past six months such main items as apparel and accessories (45%), cosmetics (38%) and consumer electronics (31%). The leading reason for cross-border shopping was quality assurance. Nearly two- thirds of cross-border buyers thought foreign merchants could assure better quality. And almost as many respondents said that there were too many counterfeit goods in China to buy online domestically. Both responses were more common than citing cost.12 On the other hand, according to the Korea Customs Service (KCS), Korea’s direct online purchases of foreign goods reached USD 1.54 billion dollars in 2014, a drastic increase from just USD 270 million in 2010. Korea's overseas direct purchases are expected to reach 20 billion dollars by 2020, as more consumers search for bargains abroad. Over 70% of the purchases were made by women, who bought clothes, health supplements and shoes. Most of the purchases were made in the U.S., which had roughly 75% of the sales, followed by Europe and Japan.13 However, South Koreans made fewer direct purchases of USD 1.52 billion from abroad in 2015, with the figure falling of 1.4% compared to a year ago, for the first time since the country first began to record such purchases. The drop is noteworthy because direct purchases of foreign goods by South Koreans have been growing by double digits. The decline was mostly attributed to a strong dollar and private sector efforts to woo back domestic consumers. Direct purchases from the U.S. accounted for 73% of all goods bought by South Koreans, with Europe and Japan coming in at 13% and 4%, respectively. The U.S. market share was unchanged from the year before, but the pace of growth has slowed significantly. Especially China’s market share suffered a sharp drop to 3% from the previous 10%, mostly on the account of a stronger Chinese currency. 14 11 Keira Mcdermott and Payvision BV, “Key Business Drivers and Opportunities in Cross-border e- Commerce : Entering an Omnichannel World, 2016”, 2016. 12 CCTV News, “Quality Concerns Drive Cross-Border Commerce in China”, 2015.9.23. 13 Arirang TV News, “Korea's overseas direct purchases to reach US$20 bil. in 2020”, 2015.11.15. 14 Korea Herald News, “Overseas direct purchases fall for first time in 10 years“, 2016.1.14. 41
9. Explosion of mobile Internet and m-Commerce Technology development plays a key role in the adoption and growth of e- Commerce. With the explosion of mobile Internet, a new age comes in m-Commerce. More and more people in both developed and developing economies are using the mobile Internet rather than PC as their first or onlymeans of going online.In this sense, m- Commerce has the potential to become a major channel for shopping and to change consumer shopping habits. Several factors are fueling this trend, including expanding coverage, increasingly sophisticated mobile-device functionality, sharply falling prices and fast-rising sales, a growing selection of smartphones and tablets on the market, and the development of new categories of devices such as wearables and connected home devices. Global smartphone sales grew roughly 20% in 2014, and this growth was led by big emerging markets such as China, India, Brazil and Indonesia. Simultaneously, average unit prices are falling and smartphones are far more accessible. As a result, mobile Internet penetration worldwide has doubled from 18% in 2011 to 36% in 2014.15 The rapid expansion of m-Commerce in these emerging markets, where Internet penetration was always low, is key to the growth of international e-Commerce. Now consumers, with increasing levels of disposable income in markets with low domestic availability, have access to multiple platforms and e-Commerce markets from the palm of their hands. Another factor is more reliable data connections that enable increasingly data- intensive activities. Some 60% of the world’s population is now covered by 3G connectivity. The mobile Internet is creating entirely new businesses and business models, as well as transforming traditional companies. All kinds of businesses are using mobile technologies to improve operations, cut costs, and reach new markets and customers. The digital economy is flourishing on mobile devices. In 2015, around 8% of totalglobal retail volumewas done bye-Commerce, using neither cashnor a card-present means.About 47% of total e-Commerce was made by mobile devices like smartphones and tablets, and 28% of this figure was accounted for by m-Commerce.16 In short, popular usage of smartphones,greater connectivity andhigherspeed of mobile Internet, improved tech-adoption and greater trust in online spending are factors all influencing the rapid growth of CBEC, which is getting more and more based on m- Commerce. Consumers are getting sharper and the world is getting smaller, every year. However, consumers get so frustrated when trying to shop on their smartphones. The most prevalent of these is smartphones' small screen size. This makes product details difficult to read and payment information frustrating to enter, especially because many 15 Boston Consulting Group, “The Growth of the Global Mobile Internet Economy”, 2015.2.10. 16 Keira McDermott, “The Mobile Payments Report 2016; An omnichannel evolution”, 2016. 42
10. sites are not mobile optimized. This is far and away the main reason that customers give up: completing a purchase on a phone just takes too much work. Speed is also a problem. Mobile users often shop on the go, which provides convenience but also puts them at the mercy of spotty Wi-Fi and LTE connections.And finally, users feel less secure when entering their payment information on a phone when compared to a desktop or laptop. But companies are starting to address these problems and are providing a boost to m-commerce as a result. Smartphone manufacturers are enlarging their phones to improve the user experience, which helps not just mobile shopping, but gaming, mobile video, and more. Social media sites such as Facebook, Twitter, and Pinterest have all introduced "buy buttons" that let shoppers make purchases without having to leave the platform. And many retailers have introduced one-click checkout to their sites. This method requires shoppers to enter their payment information once, and then they can use the one- click option to make purchases without having to re-enter it. Fintechfor cross-border e-Commerce (CBEC) In our daily life and business, there are many payment methods; cash, checks, money orders, debit cards, prepaid cards, charge cards, bank transfer, mobile payments, etc. Traditional in-store purchasing with cash, credit card or debit card still prevails as the primarycommerce channel. However, the distinction between paymentchannels is increasingly unclear. For example, ifa customer completes a purchase in a physicalstore via their smartphone linked to their creditcard, do we class it as an in-store payment, amobile payment, a credit card payment, e-Commerceor mobile point of sale (m-POS)? Everyday payment methods can be divided into local and global methods. Localpayments address the respective domestic economy and have been installed for e- Commerce. They are operated by local banks and processed in local currencies, have their own unique application and settlement following country regulations. Meanwhile, global payments primarily compete with credit cards and address consumers who have concerns depositing their credit card data online, and worry about the risks associated with using contactless payments or paying for things through their smartphones.17 One of crucial success factors in CBEC is the availability of the right mix of payment methods accompanied by regional payment behavior.18 Especially, trust and security remain big issues for mobile payments in CBEC. With the mobile device revolution, the traditional wallet like credit cards and cash would give way to a new technology embedded into our mobile phones.So far, it hasn’t 17 Bill Fisher, “Trust and security remain big issues for mobile payments”, The Telegraph, 2017.3.7. 18 Markus Rinderer, “Alternative Payments Cross-Border e-Commerce”, 2015.10.6. 43
11. happened. Most people continue to pay for things using traditional credit cards and cash. But the mobile payment revolution is rapidly coming by finance technology (Fintech). As a definition, Fintech, the convergence of technology and finance, is usually applied to the segment of the technology startup scene that is disrupting sectors such as mobile payments, money transfers, loans, fundraising and even asset management. Especially, it is to provide more user-friendly, convenient, secured and trusted payment methods for CBEC. For merchants, Fintech payments contribute to building customer-confidence.Thus merchants obtain valuable tools to increase their sales within their payment process by integrating Fintech payments. Additionally, they provide particular security features which secure merchants form fraud and chargebacks. For consumers, Fintech payments are often the favoured type of online payment. They give consumers the opportunity to pay the way they are mostly trusted. Compared to credit cards, the usually required security steps such as user name, PIN, password, etc., provide a higher security quality and let consumers thereby feel safe. Fintech payments account for 22% of global online transactions already, and continue to grow in acceptance. A report from WorldPay reveals that by 2017 they will rival cards as the world’s most popular payment method. e-Commerce purchases made using Fintech payments are expected to rise to 59% (up from 43% in 2012), while online payments using credit cards will decline to 41% (down from 57% in 2012).19 Among Fintech payments, mobile payments is getting in place very rapidly. The number of smartphones around the globe exceeds 1.4 billion, with an average annual smartphone ownership growth rate at 44%. The continuously increasing smartphone penetration is accelerating the spread of mobile shopping, with consumers becoming more comfortable making purchases via mobile devices at increasing value. m-Commerce sales are estimated to top €100 billion. In 2012 already 7.9% of the total e-Commerce turnover in the UK was generated via mobile devices. In Germany it was 7.3%, followed by Turkey (6.0%). In the US, m-Commerce made up 4.2% of total e- Commerce revenues.20 In November 2015, the Korean financial regulator gave preliminary approval to two consortiums, Kakao Bank and K-Bank, for the purpose of nurturing local Fintech start- ups and boosting Fintech adoption. These two Internet-only banks are led by the fast- growing mobile giant Kakao and telecom operator KT Corp. to start banks free of the brick-and-mortar branches.Thesebanks are expected to lower costs and introduce new products and services optimized for the mobile platform. In another key development in the payment segment, Samsung Electronics, Korea’s towering electronics giant, entered the field with the launch of Samsung Pay as fast, easy and safe online payment solution in August 2015. The company is currently rolling out the 19 Markus Rinderer, “Alternative Payments: Rival to the card in global e-Commerce?”, 2014.10.15. 20 Markus Rinderer, “Alternative Payments Trends in Alternative Payments around the Globe”, 2014.6.5. 44
12. solution, installed on its select smartphone models, to overseas markets, which competes against Google Wallet, ApplPay, Alipay, etc. Threat of fraud in Fintech payments While the level of fraud in Fintech payments is currently low compared with card fraud, it should not be ignored. Tactics deployed by fraudsters against Fintech payments include network and phishing attacks, and money laundering.21 Network attacks have been a successful tactic used by fraudsters, mainly because some payment methods do not use a “checksum” tool. This enables fraudsters to manipulate and freeze the URL between a payment provider and a merchant, so enabling manipulation of payment vouchers. Phishing has also become more prevalent as some payment methods do not enforce second-factor authentication. This allows fraudsters to hack into accounts using key- logging software and to glean information about passwords and account details that have been entered by the consumer. Fraudsters have also been successful in laundering money through wallet type structures via B2B or B2C relationships within the wallet. This can be difficult to detect and may leave victims exposed to fraudulent websites and without protection from fraudulent purchases. Accordingly, in order to prevent fraud in alternative payments, payment service providers (PSPs) and independent sales organizations (ISOs) and merchants should cross- check reference and account details in order to identify any anomalies. Many Fi9ntech payment methods are processing transactions through in-house rules and scoring engines today. This will ultimately drive declines much like bank declines, so how does this impact conversion, customer experience and merchants competitive position in terms of payment acceptance? And how does this align to the costs of processing alternative payments? All these considerations must be aligned to the risk exposure these solutions represent. The key consideration from a fraud perspective is that the fraudster will always find the weakest link. If merchants’ strategies are card centric, it will not be long before the fraudster identifies and leverages this. A fraud strategy should be payment agnostic and rely more closely on peripheral data held and exposed by the fraudster. This then becomes the key decision-making element of rules. Device, IP, connection, delivery, amount, product and history data is critical for exposing and detecting fraudsters. The payment mechanism is often the fastest changing piece of data within the payments landscape. A card, a wallet ID or payment method can frequently be changed, while a delivery address will change far less frequently. 21 Markus Rinderer and Kieran Mongey, “Threat of fraud in alternative payments”, 2014.2.20. 45
13. Merchants, PSPs/ISOs should not allow fraudsters to jump from cards to Fintech payment methods and so by-pass their traditional credit card centric rules and expose their alternative payment strategy to increased fraud. Conclusion Cross-border e-Commerce (CBEC) has become not only very attractive and effective channel between sellers and buyers across the world, but also a large impact on the changing role of the regions in the global economy. As mobile commerce (m-Commerce) continues to explode globally with the rapid growth of smartphone sales, consumers expect to shop anywhere, at any time of day, from any device, machine or channel. Consumers are getting sharper and the world is getting smaller, every year. Recently, Fintech, the convergence of technology and finance, is expected to provide more innovative, convenient and reliable alternative payments, and thereby promote CBEC more and more rapidly. In conclusion, the heating issues and events in the field of CBEC and Fintech payment service show that these are not ‘fashion’ but ‘trend’ to be prepared for. REFERENCES Andrew Grainger, “Customs and Trade Facilitation: From Concepts to Implementa- tion”, World Customs Journal, Volume 2, Number 1, 2009, pp.18-20. Arirang TV News, “Korea's overseas direct purchases to reach US$20 bil. in 2020”, 2015.11.15. Bill Fisher, “Trust and security remain big issues for mobile payments”, The Telegraph, 2017.3.7. Boston Consulting Group, The Growth of the Global Mobile Internet Economy, 2015. CCTV News, “Quality Concerns Drive Cross-Border Commerce in China”, 2015.9.23. eMarketer, Jan 2014, www.emarketer.com. Global flows in a digital age: How trade, finance, people, and data connect the world economy, McKinsey Global Institute, April 2014. Jill Finger Gibson, “e-Commerce: A Maturity Roadmap and Partner Selection Guide“, Digital Clarity Group, 2014. Keira Mcdermott and Payvision BV, “Key Business Drivers and Opportunities in Cross- border e-Commerce : Entering an Omnichannel World, 2016”, 2016. ___, “The Mobile Payments Report 2016; An omnichannel evolution”, 2016. Korea Herald News, “Competition heating up in fintech sector”, 2015.12.31. ___, “Overseas direct purchases fall for first time in 10 years“, 2016.1.14. Markus Rinderer, “Alternative Payments Trends in Alternative Payments around the Globe”, 2014.6.5. 46
14. ___,“Alternative Payments: Rival to the card in global e-Commerce?”, 2014.10.15. ___, “Alternative Payments Cross-Border e-Commerce”, 2015.10.6. ___ and Kieran Mongey, “Threat of fraud in alternative payments”, 2014.2.20. McKinsey Global Institute, “Global flows in a digital age: How trade, finance, people, and data connect the world economy”, 2014.4. Park, Phil Jae and Kim, Jung Duk, “Cross-Border e-Commerce, Is it Silk Road or Mirage?”, Trade Focus, Vol.12 No. 40, Korea International Trade Association, 2013.7.12. Payvision, “The Mobile Payments Revolution”, 2015. Vinod Sharma, “What is FinTech and where does it Live?”, 2016.7.26. WTO, “Trade Facilitation Agreement : Easing the flow of goods across borders”, 2014. eMarketer (www.emarketer.com). Internet World Stats ( Statista ( 47