E-commerce and e-payments: Unused potential for media outlets

Aleksandar Birovljev

Aleksandar Birovljev

min read

E-COMMERCE AND E-PAYMENTS: UNUSED POTENTIAL FOR MEDIA OUTLETS

The COVID- 19 pandemic turned the world upside down, media industry included. Many media shut down forever, while at the same time, remote work and life behind closed doors revealed untapped opportunities for media and e-commerce, which had unprecedented growth. In fact, e-commerce had bigger growth during the first three months of the pandemic than during the previous ten years of existence. As a result, the growth estimates and projected trends in e-commerce presented before January 2020 have been exceeded. As a result of these trends, large media are developing their monetization strategies in line with e-commerce development trends.

Media for All (MfA) project, especially the business development stream run by Thomson Foundation (TF), supported local media outlets in the Western Balkans countries by providing permanent mentoring, customized capacity building, and investment grants. TF team has experienced and identified various capacity and knowledge gaps when it comes to successful installment and implementation of e-commerce through local media digital platforms.

On one side, there is a lack of experience and knowledge within media teams on the technical and business side of e-commerce and its opportunities, while on the other the lack of technical and human resources is an additional obstacle for its successful introduction. Additionally, there are many contextual problems that resulted from the fact that e-commerce services are not easily available to local media in these countries.

While in developed European markets current trends include conversational commerce (Alexa, Siri) and card-based payments are a commodity, the market in the WB is still dominated by cash. And most of the local media are still struggling to have updated websites.

E-commerce trends in the WB

E-commerce-trends-in-the-WB

Southeast Europe, including the Western Balkans countries, has been considered a market with great potential for the development of e-commerce even before the global crisis. For years, this market has been recording double-digit growth in both the turnover and the number of transactions. The digital media has achieved a double-digit growth in 2020 compared to 2019.

The number of e-commerce users is a very important indicator of the size and of the potential of the market. This is specifically important for “immature” e-commerce markets like WB6 markets are. There is a notable change in customers’ behavior as well. Nowadays, paying bills online is acceptable, even desirable. Only in 2019, the major part of the elderly population in the countries of the region considered it unreliable.

One of the largest Telecommunication companies, operating in multiple countries in the Western Balkans, reported an increase in paying bills online by that specific customer group. The pandemic has led to more digital content being consumed in the media.

The usage of payment cards has increased in all WB countries. Serbia, North Macedonia and Montenegro are in a more favorable position compared to other countries in the terms of card use. In Albania, North Macedonia and Kosovo, the whole process of Payment Service Providers (PSP) inclusion is slower due to the slower development of e-commerce acquiring banking.

Developing a single centralized payment solution for monetization of digital media content and media-related business and services in the Western Balkans countries is a necessity.

Joint payment platform

joint-payment-platform

Based on observed trends and experiences gathered from piloting and testing different payment modalities with media in the WB6, this article advocates creation of regional media payment platform that would provide to different regional independent media a tool on how to reach sustainability through monetization of their content.

Creating a single payment platform for card acceptance in all six countries is a very complex task. To illustrate the complexity of processing payments through a single payment platform, we can use two examples:

● Simple case: In case of a reader from Bosnia and Herzegovina that would like to access digital content on BiH portal transactions should be routed to a local acquiring bank.

● Complex case: In case when a reader from Montenegro would like to access digital content from Bosnia and Herzegovina, decision on transaction routing becomes complex as this transaction would be classified as a cross border transaction with additional service fees plus it would include currency conversion rates.

Every project involves risk and challenges that should be properly addressed in order to mitigate failures and increase the probability for successful implementation. For the proposed solutions this includes the following - regulatory aspect, optimization of business model, piloting different solutions and content quality.

Access to e-payments: Regulatory aspect 

One of the challenges for creating a unified technical solution are regulatory conditions and requirements that differ from country to country. In that regard, identifying the differences and applying them to a single technical platform is time and cost consuming. Solution should be localized and customized to each of the markets. Media access to different e-payment services and methods will vary from country to country, based on availability and regulatory framework. For example, each country in the region, except Kosovo and Montenegro, has their own currency. Kosovo and Montenegro use EUR, but the payments between entities in these two countries have to go through intermediary banks in the EU.

Business model and model of monetization

business-model-and-model-of-monetization

Independent media are usually smaller than national or mainstream media. They have smaller and a more specific, or niche, audience. This should be taken into consideration when creating business models and marketing strategies. Optimal monetization model will depend on audience profiles, media need and readers expectations.

Business optimization

Over the years, readers got used to accessing the content for free. There is already a history of failed attempts to introduce payment options on similar portals in this region. It is necessary to pilot several monetization models if the first one does not give satisfactory results. By piloting and probing different monetization models, media should be able to identify the optimal solution.

Quantity vs. Quality

This dilemma is based on the assumption that readers don’t want to pay for content that they can obtain for free somewhere else. The argument here goes that there are a significant number of media offering the same or similar content, and if one outlet introduces 1a paywall then users will turn to other outlets that continue offering free content. Media are often trying to overcome this challenge by providing more content versus quality content – giving priority to quantity over quality. But this approach brings only short-term success - increase of number of visits but not an increase of financial stability and revenue. Examples from many similar cases show that quality content can find the path to the readers that are willing to pay for quality.

Proposed solution

proposed-solution

A unique payment solution must be found in the context of projects similar to ‘Media for All’ and to respond to the needs and realistic capacities of the media that are close beneficiaries. A logical approach in that case would be to start the development process from North Macedonia and Serbia first (due to highly developed banking sector), and Bosnia and Herzegovina immediately after. In that way the best traction would be enabled with full achieved regulatory compliance.

The project should be developed in two phases due to the complexity of regulatory requirements in all six markets and different stages of market development in each of the countries. That would enable better control and risk management for the overall project success.

The first phase would include creating bases on three most developed markets (Serbia, North Macedonia and Bosnia and Herzegovina). This recommendation is based on the size of the markets and their different development stages. It is important to cover markets with the highest number of potential users in order to generate enough traction for project sustainability. The first phase will focus on basic monetization methods with widely developed payment methods: subscription, donations and membership through payment cards acceptance.

The second phase would include the remaining three markets (Montenegro, Kosovo and Albania) and adding advanced payment solutions like e-wallet as well as implementation of more complex monetization methods: paywall or pay-per-view. The second phase would be financed from ongoing revenues and new project grants.

The business component will be represented by a separate company that will manage the overall business model and will represent project interests. A business entity would manage all technical processes, technical integration with PSPs and acquiring banks in all markets and general support for all media. Collaboration between a business component company and media would lead to synergies in negotiating terms and conditions with PSPs and acquiring banks, education about new e-commerce trends, and support in implementation of new monetization strategies and payment methods.

KEY CONCEPTS AND TERMINOLOGY

E-commerce – also known as electronic commerce or internet commerce, refers to buying and selling of goods or services online, and the transfer of money and data to execute these transactions.

Merchant – a person or company that sells goods or services exclusively through the internet.

Merchant account – a type of commercial or business bank account that allows customers to accept and process electronic payment card transactions.

Payment method – a process (or a set of processes) a customer is using in order to pay for its order.

Payment transaction – an act, initiated by the payer or by the payee, of placing, transferring or withdrawing funds, irrespective of any underlying obligations between the payer and the payee.

Payment instrument – any personalized device and/or a set of procedures agreed between the payment service user and the payment service provider, used by the payment service user in order to issue a payment order. Cards, credit transfers, direct debits and e-money are non-cash payment instruments with which end users of payment systems transfer funds between accounts at banks or other financial institutions.

Payment card – a payment instrument and a part of payment system issued by financial institutions (such as a bank) to a customer that enables its owner (the cardholder) to access the funds in the customer's designated bank accounts, or through a credit account and make payments (through major card schemes such as Visa, Mastercard, UnionPay, American Express, Dina).

E-money (electronic money) – is broadly defined as an electronic store of monetary value on a technical device that may be widely used for making payments to entities other than the e-money issuer. The device acts as a prepaid bearer instrument which does not necessarily involve bank accounts in transactions.

Payment Service Providers (PSP) – also known as merchant service providers or PSPs, are third parties that help merchants accept payments. Payment service providers enable merchants to accept credit/debit payments (as well as bank transfer, real-time bank transfer, etc.) by connecting them to the broader financial world.

Aggregator business model – a networking e-commerce business model within which the firm, known as an aggregator, brings together, at one place, information and data about a particular good or service offered by several competing providers. The aggregator makes providers its partners, and sells their services or products under its own brand.

About the author:

Aleksandar Birovljev

Leading regional expert in domain of e-commerce, e-payment solutions and digital business planning for various clients, including the biggest media publishers in the region (Axel Springer, United group), biggest acquiring banks, e-commerce merchants, betting online companies and online retailers. Mr. Birovljev is a pioneer in e-commerce and e-payments. He developed and launched first online shopping mall, first classifieds online portal, implemented some of the market-changing e-payment features (card tokenization, one-click-payments, etc.). More than 2.000 business models were evaluated by Mr.Birovljev in period while he was head of e-commerce in largest regional bank and in years aftewards. In Serbia he closely worked with USAID media project to provide technical assistance to media stakeholders in developing a more enabling business environment for media. Working on improving regulatory legislative and economic environment for media, with specific concentration on optimizing online payments as a basis for enhancing digital business models for media. He specifically worked with Beta agency (payment solution), daily Danas (digital subscription), Nova Ekonomija (e-business and e-payment consulting), Foundation Catalyst (creating innovative payment infrastructure for servicing media Pescanik, KRIK, CINS and Fakenews).

Author

  • Aleksandar Birovljev

    Leading regional expert in domain of e-commerce, e-payment solutions and digital business planning for various clients, including the biggest media publishers in the region (Axel Springer, United group), biggest acquiring banks, e-commerce merchants, betting online companies and online retailers. Mr. Birovljev is a pioneer in e-commerce and e-payments. He developed and launched first online shopping mall, first classifieds online portal, implemented some of the market-changing e-payment features (card tokenization, one-click-payments, etc.). More than 2.000 business models were evaluated by Mr.Birovljev in period while he was head of e-commerce in largest regional bank and in years aftewards. In Serbia he closely worked with USAID media project to provide technical assistance to media stakeholders in developing a more enabling business environment for media. Working on improving regulatory legislative and economic environment for media, with specific concentration on optimizing online payments as a basis for enhancing digital business models for media. He specifically worked with Beta agency (payment solution), daily Danas (digital subscription), Nova Ekonomija (e-business and e-payment consulting), Foundation Catalyst (creating innovative payment infrastructure for servicing media Pescanik, KRIK, CINS and Fakenews).

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