William Hoyle

Charity Technology Trust

Virtual Money

CFDG Conference – April 2005

Contents

• Virtual money. Facts & Figures

• Internet use & e-Commerce

• What are charities doing?

• Virtual Payment services – what is available?

• Mobile as an online donations channel

Payments Market Place Today

• Plastic cards are the most heavily used non-cash payment method in the UK, with around 123 million multi-function payment cards in issue at the end of 2002.

• There were a further 23 million cards whose sole function is to withdraw cash and 22 million store cards.

• Approximately 90% of adults hold one or more cards.

• The number of transactions on UK-issued cards increased by 9% in 2003 to reach 7.2 billion.

• Total plastic card spending was £211 billion during 2002, or £86 per adult per week.

Source: Association For Payment Clearing Services APACS

Payments Market Place Today

• Card Fraud in the UK reached £505m in 2004 up 20% on 2003. Fraud is growing rapidly in many countries around the world, highlighting the importance of a global card security system

• Chip cards provide the basis for this as they are built to an internationally-agreed standard, with many countries around the world already implementing chip systems.

• Chip technology uses highly sophisticated processing to identify genuine cards and make counterfeiting extremely difficult and hugely expensive.

• Over the next two years all debit and credit cards in the UK will be reissued with embedded microchips, identifying cardholders using a personal identification number (PIN).

Card Payments Processing how it works

MERCHANT BUSINESS BANK

A/C

MERCHANT ACQUIRING

(CARD) BANK

MERCHANT using an EFT terminal

Internet Use

• There are now nearly 60% of UK households with access to the internet.*

• 66% of adults have used the internet at some time and of these 85% are regular users and half use the internet every day *

• Broadband take-up in the UK is around 6m connections and speeds of 2-4mb are now available at around £40 per month*

• Broadband connections should overtake dial-up by mid 2005• Internet & email traffic levels over Christmas 2004 were similar

to that of a normal weekend **• Beyond web browsing, the fastest growth in internet use is in

the e-commerce arena*

*Ofcom** Ofcom/LINX

Internet Use

Internet Use e-Commerce

•46% of adults spent over £200 on the web in the three months prior to Oct 2004*•£3.5bn spent online in the UK over Christmas 2004, an increase of 40% on 2003**•10% of all UK credit card spending now takes place online•tesco.com claim to have taken 750,000 online orders for Valentines Day roses in 2005!•18% consumers do at least part of their banking on the internet***•A growing proportion of 16-44 year olds prefer self service facilities***

*NS Omnibus Survey**Source IMRG***NFP Synergy/nVision

Card Payments Processing via the Internet

MERCHANT BUSINESS BANK

A/C

MERCHANT ACQUIRING

(CARD) BANK

INTERNET PAYMENT GATEWAY

MERCHANT using an Internet payments terminal

Online Payments - What are charities using?

•55% of charities accept online credit card donations

•Over half of these charities outsource this function

•70% of charities not accepting online donations, plan to develop this function in the future.

•Back office processing often handled separately

•Only 19% of charities offer an online direct debit donation facility.

Source:Giving (in) to the Internet - Jan 2005 - Goatman.

Direct Debits

• 35 million people in the UK now use Direct Debit

• People pay an average of five bills by Direct Debit

• Since 1990 the proportion of people who actively prefer to pay their bills by Direct Debit has risen from 11% to 48%

• In 2004, over 2.6 billion Direct Debits were processed by the high street banks and major building societies

• 48% of all regular bills are paid for using Direct Debits. This is the most popular method compared to cheques (16%), cash (11%), credit cards (4%) and debit cards (2%).

Source: BACS

Online paymentsCharity Sector Trends

1.4

1.4

1.6

1.6

2.1

2.1

2.2

2.3

2.5

2.7

2.8

2.9

3.1

3.2

3.4

2.9

1 1.5 2 2.5 3 3.5 4

Survey visitors

Allow visitors to communicate with each other (forums)

Gather contact details from visitors

Gain feedback about charity's work

Provide existing volunteers with information

Advertise paid vacancies

Recruit new volunteers

Raise funds

Online enquiry system

Provide information for potential donors

Generate new supporters for the charity

Provide offline contact details (e.g. phone number)

Provide information for beneficiaries/ clients

Educate/ provide information as part of mission

Raise awareness of the charity's mission

Raise awareness of the charity

Mean Response Score (Purpose)

Website Purpose Mean Scores & Ranked Order

Source : Giving (in) to the Internet, Goatman 2004

Charity Sector Trends

*Difference between groups is statistically significant 1 1.5 2 2.5 3 3.5 4

Survey visitors*

Allow visitors to communicate with each other (forums)*

Gather contact details from visitors*

Gain feedback about charity's work

Provide existing volunteers with information

Advertise paid vacancies*

Recruit new volunteers

Raise funds*

Allow visitors to contact you via an online enquiry system

Provide information for potential donors*

Generate new supporters for the charity*

Provide offline contact details (e.g. phone number)*

Provide information for beneficiaries/ clients

Educate/ provide information as part of mission*

Raise awareness of the charity's mission

Raise awareness of the charity

Mean Response Score (Purpose)

over £1 million

£1 million or less

Source : Giving (in) to the Internet, Goatman 2004

Differences Between Website Purpose Mean Scores (Fundraising Income)

Virtual Money – What is available?

• online card donations systems

• online direct debit payments systems

• combined online and back office processing, administration and collection management systems for:

- credit and debit cards (single and repeat donations)

- direct debits (combining paper and paperless)

Virtual Money – What is available?

online Card Donations systems

Virtual Money – What is available?

online Card Donations systems

Virtual Payment Services - What is available?online Direct Debit systems

Virtual Payment Services - What is available?

online Direct Debit systems

Virtual Money - What is available?

Integrated Administration and Management systems -Cards

Virtual Money - What is available?

Integrated collection management systems - Direct Debits

Mobile Payments

• There are more mobiles in the UK than people• More interesting perhaps is the growth of mobile data• 2.5bn text messages in January 2005*• 133bn WAP pages in 2004*• 72% of women prefer to text than talk!**• One third of over 65’s with a mobile use text on a

regular basis**

* Source: MDA 2005** Source :ICM

Mobile Payments

• Traditionally viewed as high cost, low ticket. i.e. SMS• High Speed Mobile Data networks ‘3G’ create a new

payments channel– Colour screens, higher bandwidth, compelling content

• Wireless protocols will enable ‘proximity payments’• Major inhibitor is consumer perception of security• Individual schemes already in place

– Vodafone m-pay• Standards the key to acceptance

– Mobile Payments Forum– Simpay

Mobile Payments- typical transaction

Summary

• E-Commerce is growing rapidly and accounting for a significant element of consumer purchasing

• Charities are slowly catching up with the exception of online direct debit

• There are tools available that enable these services, simply and efficiently

• Growing consumer acceptance of interactive services will have wider implications for charities over time

• E-Commerce will extend to the mobile channel (m-commerce) as 3G rolls out and will cease to be a low value/high cost option