mediaresultA dossier by mediafinanz AG

first issue 2010

Topics of this issue:

SEPA direct debit Payments without boundaries

Cross Border Trading 60 per cent failed purchases

mediafinanz AG joins largest network of collection worldwideInterview with Carl Hackman, Regional Director, Europe (North).

European shopping cartEUR 84.31 worth of goods

International debt collectionEurope-Handbook on Collection published

in collaboration with

4The best possible national service providerIn September 2009, mediafinanz AG was appointed official partner of Global Credit Solution (GCS), the largest network of collection agencies worldwide. With this move the company has laid out the foundations for international debt collection through its own mediafinanz system. For this reason, medi-afazit spoke with Carl Hackman, Regional Director, Europe (North).

660 per cent failed purchasesE-commerce in the European Union is still facing many obstacles according to a report published by the European Commission in XXX. Within the scope of this survey, 11,000 orders were placed online. More than half of these purchases failed if buyer and seller did not live within the same country.

8Payments without boundariesThe 01.11.2009 was hailed as a landmark for traders in Europe. Since then entrepreneurs across Europe have been able to collect outstanding accounts receivables by way of standardized direct debit. The single euro payments area (SEPA) ensures a perspicuous method of settlement, a uniform judici-ary and a clearly defined data format. In the medium term, direct debit can be expected to establish itself as convenient and economical alternative to current payment methods in Europe.

10EUR 84.31 worth of goodsThe average value of the basket of goods purchased online from European web shops is further increasing. According to the E-Commerce Report 2009, recently published by Deutsche Card Services, the mean value of goods bought through online services in Europe amounts to EUR 84.31. In comparison with the same period the previous year, consumers acquired additional products worth Euro 4.18 with every online order.

12Europe-Handbook on Collection published The Europe-Handbook on Collection, published by Dr. Alexander Ey, illustra-tes the collection practices in 27 European countries. Experts with in-depth knowledge of the subject describe its application in their respective countries and make this handbook of 356 pages the most comprehensive compendium of collection practices in Europe available to date. The Europe-Handbook on Collection was brought out by the Welther-Verlag in December 2009.

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Dear Reader,

Many thanks for your interest in mediafinanz AG, Germany’s GCS-partner for pro-fessional and transparent receivables management.

Since the year 2000, our company has established itself as a reliable partner for more than 15,000 clients and has set many new standards within the industry. As early as 2003, we established our market-leading online client and customer interface solution. Furthermore, we were the first of over 700 within our industry to be certified by TÜV - Germany’s independent technical advisory association – for receivables management in the areas data security, complaints handling and process management.

Despite having reached a certain size with our 75 full-time employees, we are still owner-managed and maintain the ability to offer tailor-made solutions for our corporate clients. We are looking forward to contributing also to the development and success of your company through our focus on partnerships and results.

What follows is a collection of articles from our mediafazit-publication, compiled with the kind help of Global Credit Solutions. I trust the choice of topics appeals and I wish you pleasant reading.

Kind regards,

Dr. Alexander EyCEO mediafinanz AG

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Editorial

mediafazit: Mr. Hackman, your company British CCI Legal is partner of the global collection asso-ciation GCS as well. What does this association mean to you?

Hackman: Let me talk briefly about my com-pany first. CCI is a financial service provider offering a broad range of services. Besides national debt collection, we deal with a large number of international collections. This is why at some stage we were looking for an interna-tional network of collection companies that enabled us to globally collect debts both legally and out of court. Wanting to offer our clients this kind of service proved to be challenging though, at least until we had joined the GCS-network. In hindsight it seems as nailing jelly to the wall would have been easier than managing a large network. Not everyone is pulling in the same direction and some people might not be contributing to the progress and success of the project at all. This is why we were looking for a clearly structured network able to guarantee our clients a high level of both quality and ser-vice. We have been lucky that GCS approached us in 2004, when they were about to establish a systematized international association for collection.

Where does GCS come from, how does it work and how many associated companies does the network have?

All GCS-partners are linked to each other through an IT platform and share common valu-es and goals. The organization was founded by the Australian Neil Wood, who spent most part of his working life with international debt coll-ection and risk management. He realized early the potential of a global, standardized network for collection and with GCS this idea has been materialized. Today the network consists of 80 partners. Only those companies identified by GCS to be market-leaders in their respective countries will be accepted to the GCS network. Under special circumstances, GCS has accepted two companies equal in rank. CCI Legal has been the UK-partner of GCS since 2005 and since then has been contributing to making GCS the largest global collection network. The orga-nizational structure is the network’s biggest strength, since each geographical region works independently. Thus these areas are able to bring about the best possible performance based on the local particularities. I myself am responsible for countries in Western Europe for

“The best possible national service provider for the manage-ment of accounts receivable”

In September 2009, mediafinanz AG was appointed official part-ner of Global Credit Solution (GCS), the largest network of collec-tion agencies worldwide. With this move the company has laid out the foundations for international debt collection through its own mediafinanz system. For this reason, mediafazit spoke with Carl Hackman, Regional Director, Europe (North).

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instance, and among other things I take care of complying with both the regulation of the EU and the respective country of our partner company. Our structure enables us to access new markets, continually improve our services and thus guarantee a proficient debt collection in the respective country.

Is there a code of conduct for GCS-partner?Yes, there is and it is indeed crucial to our success. The complex of rules is essentially the basis of our activities. Of course all members have to produce the licences and insurance certificates necessary. Many of us are also mem-bers of the national collection associations, which rules are binding for our members too according to the GCS code of conduct. Any de-parture from those obligations results in serious sanctions, reaching from an official warning to an exclusion from the GCS network. There is an ethics commission in our group that makes sure everyone adheres to the rules.

How do creditors benefit from a cooperation between mediafinanz AG and GCS?There are a number of reasons to engage me-diafinanz AG on the basis of its association with GCS. Some are obvious at first glance, some will be on closer inspection only. First of all, the creditor will have a significantly higher chance of actually receiving the outstanding debts. Fur-thermore, the creditor can be sure that any ac-tion taken out a by a GCS-member in his name will be highly professional and will comply with the above mentioned guidelines. On top of that the clients know that if they choose a collection agency associated with GCS, they will work with companies that GCS deems to be top-notch in managing accounts receivables.

Many e-tailers and online service providers are following the recent trend to access new inter-national markets. While this process seems to be enticing, there are also risks involved. That is right, e-commerce is one of the biggest growth markets at the moment. Great Britain alone registered online sales worth more than GBP 15.2 billion in the last quarter of 2008. That is a 50 per cent increase compared with the same period the previous year. I expect the increase rate for the current year to be similar. GCS is able to significantly minimize the risks involved with opening up towards new mar-kets. Through a cooperation with a GCS-partner based in the respective country, a client can grant or extend loans to suppliers and thus will be able to access this new market without taking the risks usually involved with such a move. In my opinion, GCS is a very flexible tool for a pretty much carefree cross-border trading. Facilitating international trade is our core com-petence.

Carl Hackman is Director of the British company CCI Legal Services Ltd. As Regional Director of Global Credit Solutions (GCS), he is furthermore responsible for the European business of this worldwide operating network of collection agencies. He is an authority on the lending business and has published numerous books on the topic. He advises both private and public institutions on fraud prevention.

Weblink:www.gcs-group.comwww.ccilegal.co.uk

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mediafinanz AG joins largest network of collection worldwide

The commission puts these deplorable cir-cumstances down to a number of reasons. The „Report on cross-border e-commerce in the EU“ notes that the majority of online companies lack presence in the neighbouring states’ mar-kets. Regulatory obstacles, many traders’ res-trained willingness to take out investments and furthermore consumers’ reservations towards ordering internationally widen the gap between the domestic and cross-border development of e-commerce. The digital commerce is hitting the borders of the analogue word, at least with regard to the end user. While it is true that 51 per cent of retailers in the EU are taking part in electronic commerce, only 21 per cent are conducting cross-border transactions to at least one other member state of the EU - this corresponds exactly to that percen- tage of retailers who state they were adverti-sing internationally. Thus offers from neighbou-ring countries remain invisible for the average European consumer. Only every second cus-tomer involved in the study was even able to remember a campaign run by a foreign supplier.

Consumers’ reservations The European consumer in general seems not to be reluctant to order from international sup-pliers. After having been confronted with offers from retailers based in other EU member states, every other person hits a foreign “buy”-button. Those remaining costumers though, who lack immediate access to foreign products, seem to regard orders from abroad as a risky underta-king. The report locates skeptics to live in those coun-tries with a comparatively low share of e-com-merce, predominantly within the new member states of the EU. When asked for reasons, participants in the survey quoted doubts about the trustworthiness of the shop or data security. Concerns like these are worrying customers al-ready in connection with national remote trade. When it comes to cross-border trade however, these worries seem to intensify drastically. In addition, customers cite obstacles resulting from the very nature of pan-European trade. Higher shipping charges can quickly qualify a comparatively lower price of a foreign product.On top of that, older consumers in particular of-

60 per cent failed purchases

E-commerce in the European Union is still facing many obstacles according to a current report publis-hed by the European Commission. Within the scope of this survey, 11,000 orders were placed online. More than half of these purchases failed if buyer and seller did not live within the same country.

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ten fail to overcome the language barrier. Many of the so-called silver surfers lack the ability to fully grasp the content of a webpage in a for-eign language. Interviewees furthermore cited worries about impending language problems in case they needed to return goods or of a war-ranty or redress claim. It might be understanda-ble that those kinds of impediments curb down some skeptics’ urge for shopping. Yet some customers might be willing to take the risk of a cross-border transaction if the saving potential is high enough. Another problem is though that most purchasers are unsure of where to obtain impartial advice about the terms and conditions of international trade. Risky business However, e-commerce in Europe is challenging for suppliers too and weaker market partici-pants quickly reach their limitations. Fraud pre-vention geared towards international markets, complying with both differing national laws and fiscal regulations and a multilingual conflict management cause enormous costs. EU-studies from 2008 quote the administrative burden for a retailer partaking in EU-wide trade to be

more than EUR 70,000. In comparison, suppliers merely participating in national trade have to disburse about EUR 5,500 only. Understandably enough this extra cost puts off the majority of smaller enterprises, which rather limit their activities to home grounds. The European e-commerce trade is dominated by medium-sized or large companies, since a high command of a foreign language and expe-rience gained through branch stores play a big role in using the internet as a lucrative cross-border distribution channel.

Weblink:http://ec.europa.eu/index_de.htm

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Cross Border Trading

For consumers in most European countries, direct debit is currently not the preferred way of settling invoices domestically, with exception of Germany, Austria and the Netherlands. With regard to international payments, direct debit in general did not stand a chance as payment method at all until the introduction of SEPA, since it was widely regarded as being too bu-reaucratic. If creditors wanted to collect out-standing claims, they were required to own an account in the residence country of the client. Obstacles likes this have been overcome with SEPA Direct Debit, since now one single national bank account is sufficient for transactions in 32 participating countries. SEPA Direct Debit in practice The new European way of direct debiting is supposed to be both more secure and accoun-table than the national versions. Whilst SEPA Direct Debit is generally in line with the German procedure of direct debiting, there are still a number of new routines for both debtor and creditor.The first step is for the SEPA mandate to be completed by the end user to authorize the

retailer for payment collection via SEPA Direct Debit. EU regulation requires this authorization to be written or conducted by way of digital signature. If this will be feasible in the day-to-day practice of e-commerce remains to be seen though, especially since the digital signature is not commonplace among end users yet. The SEPA mandate can either be conferred as a one-off payment, or as a recurrent one, for example to pay for rent or subscriptions. A com-pany is entitled to debit the account of a client without an authorization, but customers can reverse this transaction within one year. If the company had been authorized for this transac-tion by a SEPA mandate however, the refund must be claimed within eight weeks - currently six weeks are common for standard transac-tions in Germany. If a SEPA mandate has been conferred, a compa-ny is entitled to debit a client’s account without further authorization for the following 18 months. The mandate will be extended automa-tically or it expires after the initial period. Every transaction receives a unique mandate identi-

Payments without boundaries

The 01.11.2009 was hailed as a landmark for traders in Europe. Since then entrepreneurs across Eu-rope have been able to collect outstanding accounts receivables by way of standardized direct debit. The single euro payments area (SEPA) ensures a perspicuous method of settlement, a uniform judici-ary and a clearly defined data format. In the medium term, direct debit can be expected to establish itself as convenient and economical alternative to current payment methods in Europe.

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fier number, which has to be stated for every debit transaction. In comparison to the German way of direct debiting, which debits an account “at sight” only, SEPA Direct Debits have to have a specific due date. This enables both debtor and creditor to keep track of liquidity. The creditor has to meet certain deadlines. Direct debits carried out for the first time and one-off payments have to be submitted to the bank at least five days, and the mandate for recurrent payments has to presented at least two days before the due date. IBAN, BIC and UCI When using SEPA, the debtor has to provide the creditor with both his International Bank Account Number (IBAN) and the Bank Identifier Code (BIC). The payee will be identified by the Unique Credit Identifier (UCI). To provide full proof of the legitimacy of the transaction, the issuing bank submits the UCI along with the unique mandate reference to the debtor, who can then check if the mandate had initially been approved by him. UCI applicationIn Germany, the Deutsche Bundesbank acts both as issuer and administrator of the UCI. Creditors can apply for the code via the bank’s website (see mediafazit weblink) and will recei-ve the number in an email. Creditors will obtain one UCI only. If there are several posts dealing with accounts receivables, this can be illustrated by marking the respective departments diffe-rently. Companies requesting an UCI from the Bundesbank have to be based in Germany.

Employment of direct debit in the SEPA are

This map shows countries providing SEPA Direct Debit since 01.11.2009. Besides the 27 member states of the EU, Island, Liechtenstein, Monaco, Norway and Switzerland are joining the SEPA area. The figures stated for each country refer to the amount of direct debits carried out per head and year. Source: EZB Payment Statistics, SIX Group AG Zurich Weblink: https://extranet.bundesbank.de/scp/ www.sepa-news.de

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SEPA direct debit

German, and to a lesser extent British con-sumers too, were mainly responsible for this growth. While in the rest of Europe the value of the basket of goods has decreased for the first time from EUR 78.00 to just under EUR 70.00, statistics for Germany show a comple-tely different trend. Here the average sum of online purchases was EUR 96.16, almost EUR 13 more than in the previous year. Even though this amount varies significantly from country to county, the internet market in Germany as a whole stands out from the rest of Europe. During the survey period, e-merchants shipped goods worth EUR 89.13 to Berlin, which ranks the German capital and state at the bottom of the list. Hessen ranks first, here the baskets contain products worth Euro 101.86, which is 20 per cent more than the European average. German men were most active when it comes to ordering online. An Europe-wide comparison based on countries and sex states the average value of orders placed by male customers to amount to EUR 112.17 on average. This mo-ney does not necessarily stay within Germany though. Sellers from abroad make great efforts to reach international customers in general, but they are particularly interested in solvent buyers from Germany. International customers on the other hand ex-press only little interest in online sellers based in Germany. Within the scope of the survey,

94.3 per cent of clients of those retailers came from within Germany. However, it is possible that this imbalance might decrease over the next couple of years. More and more German merchants translate their websites into other languages and are thus able to attract foreign customers. Furthermore, common payment methods abroad like credit cards are becoming increasingly customary in Germany too. The credit card has replaced direct debit as the pre-ferred way of payment in Berlin, Hamburg and Hessen already. Market observers are anxiously awaiting reports on how the new SEPA Direct Debit will perform as alternative method for cross-border payment.

Business risksMaking concessions towards clients is generally rewarded with high conversion for e-businesses. However, payment methods convenient for clients like sending on account for example do require a professional risk management if the seller wants to profit as well. With regard to direct debiting, 3.125 per cent of transac-tions result in return debit notes. Even though calculable, this payment method does come with a risk for the supplier. During the survey period, two out of three bounced direct debit transactions were caused by insufficient funds in the accounts and resulted in extra hassle for online merchants. As far as the basket of goods is concerned, smaller baskets worth less than ten Euro generate the highest number of return

EUR 84.31 worth of goods

The average value of the basket of goods purchased online from European web shops is further incre-asing. According to the E-Commerce Report 2009, recently published by Deutsche Card Services, the mean value of goods bought through online services in Europe amounts to EUR 84.31. In comparison with the same period the previous year, consumers acquired additional products worth Euro 4.18 with every online order.

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debit notes, 4.802 per cent in total. This means that almost every twentieth payment in this bracket is being declined, which might be due to sellers saving on reliable risk prevention in this lower price segment.

Business hoursAlmost 55 per cent of European e-commerce transactions carried out by Germans are being done during typical business hours between eight am and six pm. The time around four and six pm proves to be most popular. Every forth “German” purchase is carried out within these two hours, Europe-wide it is every fifth transac-tion. It seems as the late afternoon is the time of choice for German customers to go on an on-line spending spree. British consumers demons-trate a different preference. They are generally more active in buying online during morning hours with transactions reaching their peak between six and eight pm, in line with the rest of Europe. If compared with survey data from the previous year, the timing for e-commerce transactions in Europe seems to be gradually shifting towards the evening. The authors of the report also examined how the turnover was spread over the days of the week. In the previous year, both Tuesdays and Fridays were those week days generating most revenue for online businesses.This distinction could not be determined anymore in the recent study, but the percentages of all working days

rather ranged between 14.48 and 15.02. As a consequence, the weekend loses Europe-wide in significance and the share of transactions done on either Saturdays or Sundays fell by 0.41 per cent each. Regarding Germany, this trend is even more significant. Here the amount of transactions carried out on the weekend fell by more than two per cent. In contrast to their fellow European shoppers, who like to use their spending power mainly on Tuesdays, they gene-rally prefer Mondays.

Weblink:www.ecommerce-report.de

The e-commerce report 2009

The analyses and results of the successor of the Pago Report are based on more than 30 milli-on online transactions done via the platform of Deutsche Card Services, part of Deutsche Bank Group. The report solely analyzes online purchases from European shops, since only com-panies based in Europa are able to use Deutsche Card Services. The report comprises all transac-tions processed by Deutsche Card Service in the time between 01.10.2007 and 30.09.2008.

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European shopping cart

The book deals with the day-to-day business of debt collection practices in Europe and espe-cially elaborates different case laws pertaining to collection in the various countries. Therefore, it is recommended to anybody already involved in intra-European trade or preparing their busi-ness for the European market.

“No one undertaking business activities in either the domestic or international environ-ment can get by without a professional claims management”, urges Ey. Especially when it comes to international trade, multiple factors can complicate an effective communication with the debtor. Ey: “It is not so much the com-munication element itself but the legal barriers that let international collection appear to be so difficult. The Europe-Handbook on Collection addresses this issue and advises creditors on their rights and possible course of action in a well-structured manner.”

Along with numerous additional facts, the compendium presents the particular rules and statutory periods of limitation in 27 European countries, lists local collection associations and

describes a customary dunning procedure for each country including prior and subsequent options.

Due to its practical approach, the Europe-Handbook on Collection caters to entrepreneurs doing business within Europe as well as to their employees associated with the dunning pro-cess. It is available for a preferential price of € 35.00 (instead of € 49.90) for a few weeks only and can be ordered from www.handbuch-inkas-so.de or the publishing house directly.

Alexander Ey (Hrsg.)Europa-Handbuch Inkasso27 Porträts des Inkassowesens europäischer Länder1st edition 2009ISBN 3-9811386-0-0Price: € 49.90 (CHF 74.90)

Weblink: http://www.handbuch-inkasso.de

Europe-Handbook on Collection published

The Europe-Handbook on Collection, published by Dr. Alexander Ey, illustrates the collection practices in 27 European countries. Experts with in-depth knowledge of the subject describe its application in their respective countries and make this handbook of 356 pages the most comprehensive com-pendium of collection practices in Europe available to date. The Europe-Handbook on Collection was brought out by the Welther-Verlag in December 2009.

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