Victorian Online Gateway Epayment Gateway Analysis

1
Victorian Online Gateway E-payment Gateway
Analysis

• Presentation to the Expert Group
• 21 November 2001

2
Objectives

• To determine the viability and appropriateness of
  implementing an online payment service as part of
  the VOG
• To outline the viability and potential uptake of
  e-payment services
• To inform the portal Tender Specification
• To identify Issues and Requirements

3
Purpose

• Determine the factors involved with delivering
  e-payment facilities from the Victorian Online
  Gateway with a focus on
• consumer payment trends and preferences
• key e-payment methods available
• high level analysis of Australian and Victorian
  government payment options
• adoption options

4
Key Questions

• Should the portal offer e-payment facilities?
• If so what e-payment facilities should it offer?
• What should be the portals role in offering the
  e-payment facilities?

5
Methods of Investigation

• High level strategic analysis
• Focussed on G2C and adhoc G2B only
• Utilised a significant amount of 3rd party
  research including consumer and industry research
  and analysis
• Two agencies active in e-payments consulted
• Expert group reviewed Draft Report and provided
  feedback
• Very limited primary research conducted (e.g. no
  consumer research and contacted only a few
  service providers)

6
Findings

• Two categories of online payments
• Online purchase of goods and services
• Online bill payment
• Two e-payment methods

7
Online Purchases
8
Findings Online Purchases

• Number of internet users making online purchase
  is expected to grow strongly to 70 by 2005
• Will fuel expectations and the demand for online
  government purchase capability over the next 5
  years
• Consumer research commissioned for the VOG found
  that over 30 of all respondents said that paying
  fines and making government purchases would be
  one of the functions that would most like to
  access from VOG

Total Users
Users Making Purchases
9
Findings Online Purchases

• There are currently few online Victorian
  Government transactions
• Current online government transactions cannot be
  accessed in one location, though Multi-Service
  Express has improved this situation
• Recommendations
• A minimum VOG online payment function is to
  provide access from the home page to a Web page
  that consolidates all online transactions
• provide a listing with appropriate links that
  then on-sends the consumer to the department
  level payment site
• accompany online transactions with the correct
  meta data to allow them to be searched and
  collated

10
Findings Online Purchases

• Last year 87 of all purchases were made by
  credit card
• Yet only 44 preferred to use credit cards

11
Findings Online Purchases

• Internet Payment Gateway for credit cards only
  viable online payment method currently and in
  near future due to
• a lack of acceptance
• consumer behaviour
• consumer fears regarding security
• authentication requirements
• speed of settlement
• Current products immature, but market
  increasingly competitive

12
Findings Online Purchases

• Internet Payment Gateway for adoption options
• Decentralised where departments and agencies
  implement their own solutions/choose their own
  service providers
• Centralised Build where the VOG builds its own
  gateway service and associated transactions
  services which is used by all of government
• Mandated Centralised Preferred Supplier where a
  pre-approved preferred gateway service supplier
  is mandated by the VOG and is required to be used
  by the whole of government for all transactions
• Optional Centralised Preferred Supplier where a
  pre-approved preferred gateway service supplier
  is optional for existing or commenced
  implementations but mandatory for all new
  implementations
• Optional Centralised Preferred Suppliers where
  pre-approved preferred gateway service suppliers
  are available to be used at the
  department/agencies own discretion. This could
  simply be in the form of a listing of providers
  that meet required specifications
• Centralised Collection where the VOG or another
  government agency manages all government
  transactions and online collections

13
Findings Online Purchases

• Issues considered at a high level when evaluating
  adoption options
• implementation costs (new solution)
• migration costs (existing solution)
• service delivery (eg features, flexibility,
  responsiveness/time to market)
• service provider charges (fixed and
  variable/transaction)
• competition among service providers
• department/agency choice and flexibility
• synergies (shared learning and infrastructure)
• consumer utility (eg choice and consistency of
  payment methods)

14
Recommendations Online Purchases

• Optional Centralised Preferred Suppliers model
  recommended
• payment gateway providers are screened and
  pre-approved
• Departments use preferred suppliers at their own
  discretion
• VOG is not a transactional portal and simply
  on-sends consumers
• Advantages
• Lower implementation
• Lower migration costs
• Greater departmental flexibility
• Leverage service delivery price improvements
  between re-tendering points
• Only two parties (bank merchant) involved in
  reconciliation

Versus the Centralised Collection where 3
parties may be involved
15
Recommendations Online Purchases

• Centralised Build not recommended
• Build own gateway and associated transaction
  services
• Departments must use or migrate to gateway
• Product/price/service levels determined centrally
  
• Disadvantages
• Likely to be more expensive than private sector
  solutions
• Cannot leverage private sector service delivery
  price improvements
• Likely to be less responsive and slower to market
• Limits department flexibility

16
Recommendations Online Purchases

• Centralised Collection not recommended
• Manages all government online transactions and
  collection
• Departments must use or migrate to new service
• Product/price/service levels determined centrally
  
• Disadvantages
• Additional intermediary likely to add to
  transaction cost
• Competition not encouraged
• Departmental choice/flexibility limited
• Lack of single point of accountability (e.g.
  three parties potentially involved in
  reconciliation) and liability

17
Findings Online Purchases

• E-payment gateway provider must link to Westpac
  as it is the acquiring bank under the whole of
  government bank contract.
• Banking contract is to be reviewed next year. All
  else being equal, changing banks likely to be
  difficult.
• Limits the available third party Internet payment
  gateway providers
• Recommendations
• Selecting a provider/s that links to all of the
  banks will minimise the migration required if a
  new government bank is chosen
• Objective of obtaining optimal Internet payment
  gateway rate

18
Online Bill Payment
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Findings Online Bill Payment

• Bill Payment Electronic Bill Payment
  Presentment (EBPP)
• EBPP providers consolidates and presents bills
  and allows payment
• Many products still relatively immature and
  unsophisticated
• BPAY
• POSTbillpay

Mature EBPP Model
Biller
Biller
service
EBPP
Consumer service
Consumer
e.g. Utility
provider
Consolidator
provider
e.g. banks and portals
PwC adapted from Forrester
20
Findings Online Bill Payment

• BPAY expected to grow 40 to 70 million
  transaction in 2001
• Adoption defying expectations (7-14 of all
  consumer bills)
• VicRoads registrations approximately 12

VicRoads Online Registration Payment
Total Transactions
14
12
BPay
10
Maxi
8
6
4
2
IVR/Call centres
0
Jul-96
Jul-97
Jul-98
Jul-99
Jul-00
Jul-01
VicRoad September 2001
21
Findings Online Bill Payment

• WAFastPay bill payment portal
• over 40 different types of state and local
  government and utility bills
• likely proxy merchant and link to external
  payment sites
• Canberra Connect bill payment portal
• over 50 types of ACT government bills
• likely proxy merchant
• POSTbillpay bill presentation and payment
  portal
• 7-8 different bills presented
• distributed via ninemsn, MYOB
• proxy merchant

22
Recommendations Online Bill Payment Payment

• Due to the massive growth in popularity of EBPP
  services all major government billers should
  consider offering their services via current 3rd
  party EBPP services.
• The VOG should also adopt a short to medium term
  vision of providing/distributing a third party
  EBPP service via its gateway which would provide
  a useful function for consumers and help to
  generate traffic for the gateway.
• VOG should not build a bill presentment or
  payment portal itself. It should
• investigate the maturity and feasibility of
  existing product/s and business models
• possibly allow the existing product/s and
  business models to mature somewhat before
  commencing this investigation.