Content Providers to Blame for Lack of Danish Success With Micro Payments, Says IDC

COPENHGEN – NOVEMBER 20, 2002 – There are several factors contributing to the success or failure of various micro payment schemes, and, more importantly, the schemes will have to offer additional benefits beyond existing payment systems.

 

While Denmark has one of the highest household Internet penetration rates in the world, consumers are actually somewhat reluctant when it comes to buying products online. According to IDC's Internet Commerce Market Model (ICMM), there are 2.3 million home Internet users in Denmark, with 57% of the population accessing the Internet from their home every month. In addition, others access the Internet from work, school etc., and the total number of Internet users has already surpassed 3 million. Of this, just 23%, or 700,000 people, are regular Internet buyers, spending just over $400 million online in 2001.

"Among the main inhibitors of ecommerce in Denmark are the lack of opportunity to evaluate products prior to purchasing as well as security concerns," said Anders Elbak, Research Manager with IDC Nordic. "However, the supply side is also to blame, as high-quality content combined with a simple reliable payment system is hard to find."

Despite their dominance, payment cards (including both Dankort and credit cards) have limitations that prevent them from being more widely used and restrict the reach of ecommerce (for example, excluding teens and other non-payment card holders). These gaps create potential opportunities for alternative payment methods. Since the basic function of a payment method is to transfer money from one party to another, its usefulness depends on liquidity – that is, the number of consumers and merchants that recognize and accept it. To compete, an alternative must:

Exploit an under-served segment of the market

Provide users with significant new and value-adding capabilities

Instantly achieve widespread acceptance (perhaps by adapting another widely used service)

Unless a new payment method has a business model or sponsor that will allow it to grow over an extended period, it is unlikely to get enough market share to compete against existing methods.

"IDC believes that there are some key factors that can support the success of new payment methods and that they are attracting banks, credit card companies, telcos, and new startups to invest in this sector. The major developments that are challenging the `traditional' payment systems and fostering the emergence of new payment methods include unabated ecommerce, increased cross-border transparency, accelerated technology solutions, momentum in person-to-person transactions," said Elbak.

IDC's Micropayments in Focus: A Danish Perspective (IDC #I02J) examines the market for electronic payment systems in Denmark. Today the Dankort is the most commonly used means, but transaction costs are, particularly for small amounts, too high for merchants' liking. During the summer several micro payment schemes were launched, and these are described in the study.

The study is available for purchase from your local IDC office or http://www.idc.com.

About IDC

IDC is the foremost global market intelligence and advisory firm helping clients gain insight into technology and ebusiness trends to develop sound business strategies. Using a combination of rigorous primary research, in-depth analysis, and client interaction, IDC forecasts worldwide markets and trends to deliver dependable service and client advice. More than 700 analysts in 43 countries provide global research with local content. IDC's customers comprise the world's leading IT suppliers, IT organizations, ebusiness companies, and the financial community.

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