Palm Card Payments

LinkPoint International, Inc., a premier provider of traditional and Internet payment processing applications, and credit card transaction processor Cardservice International, in alliance with Palm, Inc., a leading provider of handheld computers, have introduced the Virtual LinkPoint for the Palm OS platform, a new software application that lets merchants process online credit card transactions using wirelessly enabled Palm Powered handheld computers. Virtual LinkPoint for the Palm OS takes LinkPoint International’s technology, versatility and performance to new heights by transforming wireless-enabled handheld devices, such as Palm(TM) VII series handheld computers, into virtual credit card payment processing terminals.

Virtual LinkPoint for the Palm OS combines the reliabilities and securities of the LinkPoint Secure Payment Gateway — the company’s state-of-the-art online transaction processing system — with the mobility of an integrated wireless handheld device.

“Virtual LinkPoint for the Palm OS is another example of our commitment to provide merchants with the maximum in technology, service and reliability,” said Caesar Berger, president of LinkPoint International. “Online merchants will now enjoy greater convenience, along with the highest levels of security and performance available in online transaction processing.” “We have tens of thousands of e-commerce and mobile merchants,” said John Burtzloff, Cardservice International’s senior vice president of Sales. “Virtual LinkPoint for the Palm OS enables these merchants on the go to enter orders and process credit card transactions wherever they have a wireless connection, with a minimal investment in point-of-sale hardware or software.” Burtzloff adds that a major benefit of wireless terminals “is that merchants will be able to receive the lowest-possible discount rate with this secure wireless solution.”

“LinkPoint has done extremely valuable work to introduce another first for e-commerce that will help make transactions even simpler for merchants and customers,” said Dennis Burns, director, business development, Wireless Enterprise Channels and Alliances, at Palm, Inc. “Cardservice International has one of the largest merchant sales organizations in the country. We are especially excited that the Cardservice sales team will carry the Palm VIIx, as this team actively sells the secure wireless payment processing solution to its vast merchant base.”

Features of Virtual LinkPoint for the Palm OS include wireless/Internet fraud protection; connection to the Internet where wireless service is available; real-time recordkeeping; chronological viewing of recorded transactions and sales; an integrated reporting capability; and sales reports accessible via a Web browser.

The end-to-end solution also features multiple operating modes, including an instructional mode for first-time users and a standard operating mode for advanced users; a transaction storage capability, which enables merchants to continue to process orders while outside of the wireless coverage area; and quick access to frequently asked questions (FAQs), e-mail support and customer service contact information.

Established in 1994, LinkPoint International, Inc. designs, manufactures, markets and supports comprehensive, integrated data solutions for payment transaction processing in both traditional and online marketplaces. The company’s point-of-sale hardware products include the LinkPoint 3000 terminal, PrintPoint 3000 printer, LinkPoint AIO, a state-of-the-art terminal/printer combination and BankPoint PIN pad. The company’s LinkPoint Secure Payment Gateway is a state-of-the-art system for online transaction processing, composed of four unique payment interfaces — Virtual LinkPoint, LinkPoint Basic, LinkPoint Select API and LinkPoint VirtualCheck. The company’s newest innovation, Virtual LinkPoint for the Palm OS platform, is a software application that enables online transaction processing via wirelessly enabled handheld devices, such as the Palm VII series handheld computers. LinkPoint International markets its products through direct sales. The company’s domestic and international distribution channels include financial institutions, payment processors and other system integrators or resellers. For more information, visit [][1].

Headquartered in Moorpark, Cardservice International provides a wide range of noncash transaction processing options to local, regional and national traditional and Internet businesses. With more than 125 million transactions annually — from point-of-sale credit card processing to e-commerce solutions

— Cardservice International is recognized as a leader in electronic commerce and payment services. Established in 1988, the company processes every type of electronic payment method, including credit, debit, electronic benefits transfer and electronic checks. In addition, Cardservice offers popular point-of-sale hardware and software for brick-and-mortar and Internet payment acceptance. To prevent and monitor fraudulent activities, Cardservice International has one of the largest chargeback and loss prevention departments in the industry. Cardservice supports its merchants with customer service 24 hours a day, 7 days a week, in 140 languages and dialects. First Data Corp., a global leader in electronic commerce and payment services, holds a 50% equity position with Cardservice. For more information about Cardservice International, visit

Palm OS is a registered trademark and Palm is a trademark of Palm, Inc.


Sub-Prime Rebound

Wall Street let up yesterday on the beaten down sub-prime credit card stocks. Metris Companies/Direct Merchants Bank posted a 14.4% gain while Providian was up 8.1%. Atlanta-based CompuCredit also gained 5.1%. On November 5th, Providian hit a 52-week low of $2 per share but is now trading around $4 per share. Metris and CompuCredit also hit new lows this month of $13.50 per share and $5.67 per share, respectively. All three companies were pointed up again this morning in pre-market trading. Meanwhile, Fitch has lowered Providian’s long-term ratings to `BB-‘ from `BB+’ and affirmed the short-term ratings of `B’ for both entities. The Fitch ‘Rating Outlook’ set all ratings as now “Negative”. Fitch says the action is due to rising credit losses and weaker than expected receivable growth in the Providian’s core credit card business.

Biometric Smart Card Readers

SCM Microsystems, Inc., a leading provider of solutions that open the Digital World and AuthenTec, Inc., the leader in advanced biometric semiconductor technology, announced a partnership to develop readers incorporating biometrics, a market predicted to reach $1.9 billion by 2005*. SCM will deliver to businesses a single solution based on smart card technology, requiring fingerprint identification to provide high-level security for laptop computers.

AuthenTec will supply SCM with its EntrePad fingerprint sensors, based on the Company’s unique TruePrint(tm) technology. AuthenTec’s patented subsurface TruePrint technology allows fingerprints to be read below the surface of the skin, thereby eliminating any acquisition or recognition failures relating to contamination such as dirt, grime, dry skin or excessive moisture – issues that are problematic with surface imaging fingerprint sensors. Bundling the companies’ technologies, SCM will introduce a cost-effective PCMCIA reader that offers secure authentication and control of corporate data. Corporate users can securely and privately exchange data on public networks and perform applications such as online transactions, e-commerce or network security based on public key infrastructure (PKI).

“SCM is committed to providing solutions that can leverage the inherent security features of smart cards and biometrics,” said Jason Schouw, Vice President, Americas for SCM Microsystems. “By partnering with AuthenTec, we are able to integrate leading fingerprint sensor technology with our own expertise in silicon interface technology, reader design and manufacturing to create highly secure solutions that are cost-effective and easy to integrate into the overall network.”

“AuthenTec is focused on delivering standard-setting secure solutions that are convenient, reliable and easy to use,” said Steve Mansfield, Vice President of Marketing at AuthenTec, Inc. “By combining SCM’s quality readers with AuthenTec’s TruePrint-based sensors, users benefit from a single reader that controls critical access points by providing sophisticated authentication. Together, SCM and AuthenTec are bringing viable biometric solutions to the forefront of business security.”

SCM and AuthenTec will be demonstrating the new technology at COMDEX, November 12-16, at booth L1273.

SCM’s Biometric PCMCIA Reader will be available in the first quarter of 2002. For further information on SCM Microsystems’ digital solutions, please visit [][1].

About SCM Microsystems

SCM Microsystems is a leading supplier of solutions that open the Digital World by enabling people to conveniently access digital content and services. SCM’s advanced silicon, hardware and software solutions enable secure exchange of electronic information for digital applications from e-commerce to broadband content delivery by providing controlled access points to platforms such as PCs, digital cameras and digital television set-top boxes. Known as a premier supplier to OEM companies around the world, SCM also serves the retail market through its Dazzle(tm), Microtech(tm) and FAST product brands. Global headquarters are in Fremont, Calif., with European headquarters in Pfaffenhofen, Germany. For additional information, visit the SCM Microsystems Website at [][2].

About AuthenTec

AuthenTec is the leading semiconductor company providing advanced fingerprint biometric technology to the PC, wireless, PDA, access control and automotive markets. AuthenTec’s FingerLoc and EntréPad products utilize the Company’s patented TruePrint(tm) technology to read fingerprints below the surface layer of the skin, resulting in standard-setting acquisition and recognition rates. AuthenTec also provides accessible and convenient personal security through its Solutions Partner Network of hardware and software industry leaders. Based in Melbourne, Florida, AuthenTec has a global customer base of more than 50 companies. For additional information, please visit the AuthenTec Website at [][3].



Building upon a strong partnership that has existed between Thailand’s
tourism organization and the world’s leading card payment brand, Visa
International announced an exclusive global marketing partnership with
the Tourism Authority of Thailand designating Visa as the “Preferred
of The Amazing Thailand Grand Sale”

The partnership will provide exclusive advertising, promotional and marketing
initiatives in connection with consumer payment services, and preferred brand
status in areas such as event sponsorship, online sales and reservations.
“As tourism faces a new set of global challenges, Thailand and the Asia
region continue to represent a wide range of affordable and enriching vacation
and meeting options for travelers,” said Tom Shepard, executive vice
Global Marketing Partnerships and Sponsorships, of Visa International. “This
agreement further reflects our growing commitment to the tourism industry in
Asia Pacific.”

“We are pleased to be working closely with Visa to promote the Thailand’s
travel appeal to Visa cardholders globally,” remarked Mr. Pradech
Phayakvichien, Governor of Tourism Authority of Thailand. “By leveraging the
global reach of the Visa brand and the beauty and allure of Thailand, we are
confident that our partnership will heighten consumer exposure and ultimately
bolster tourism revenues and the broader Thai economy.”

The program also provides for partnership on the annual “Amazing Thailand
Sale”. It will allow for the mutual use of both organizations’ brand and
merchant signage, and cooperation with promotions in connection with key
Thailand destinations and attractions. At the “Amazing Thailand Grand Sale”,
Visa and Visa Electron overseas cardholders will enjoy special offers and
discounts from participating merchants including department stores and retail
outlets, restaurants, jewellery stores, as well as recreational and travel
merchants. Visa will also set up 10 booths in the main shopping areas for
special gifts to be redeemed on the spot. There will also be a grand lucky
draw. Over 120 thousand outlets accept Visa in Thailand.

According to Mr. Somboon Krobteerawong, Visa International’s country manager
for Thailand and Indochina, tourists to Thailand spent US$ 1.43 billion on
their Visa cards in the past 12 months ending 30 Sept 2001, representing a
on year growth of 10.2%. Asia Pacific was the top source market with
cardholders spending US$539 million, up 10% from a year ago. Among them,
Japanese tourists spent the most at US$160 million, up 5 %, followed by Hong
Kong at US$85 million, Australia at US$ 66 million, Taiwan US$63 million and
Singapore US$61 million. Visitors from the European Union spent US$623 million
on their Visa cards registering a 10 % increase over the previous year.
“Our exclusive marketing partnership with the Tourism Authority of Thailand is
the culmination of ongoing synergy and joint efforts our organizations have
shared to date,” remarked Mr. Somboon, “This platform leverages the power of
Thailand, and the world’s number one consumer payment brand, to launch
effective marketing initiatives designed to promote Thailand to Visa
cardholders around the world.”

About Visa

Visa is the world’s leading payments brand and the largest payments system
worldwide. Visa-branded cards generate almost US$2 trillion in annual volume
and are accepted at over 22 million locations around the world. The Visa
organization plays a pivotal role in advancing new payment products and
technologies to benefit its 21,000 member financial institutions and their
cardholders. Visa is a leader in Internet based payments and is pioneering the
creation of u-commerce, or universal commerce – the ability to conduct
anytime, anywhere, over any type of device. Visa can be found at

European e-Commerce

The New York Clearing House and the Euro Banking Association Tuesday announced a MOU to build a global electronic payment infrastructure that will enable Internet-based, end-to-end electronic commerce for the first time. Both organizations will establish joint working groups dedicated to making geography and currency distinctions transparent to e-commerce. The alliance says the partnership will offer advantages to banks such as leveraged investments in existing infrastructure rather than creating new systems from scratch; development of a private-sector platform for electronic payments to maximize value and innovation; shared development expenses to reduce costs; and simplified standards and operating processes to increase efficiency. The EBA includes over 150 member banks from all EU countries, the USA, Switzerland, Norway, Australia and Japan.

Moneris Signs ISO

Moneris Solutions, Inc., a leading merchant processing technology company, is pleased to announce its continued expansion into the U.S. with a new ISO (Independent Sales Organization), Standard Payments, LLC. Standard Payments is based in the metropolitan Detroit area, maintains a business development and account support center in Dallas, and is focused on meeting the payments acceptance needs of small and middle market bankcard merchants across the United States.

“Our agreement with Standard Payments enables us to extend Moneris Solutions’ POS solution to a solid merchant customer base while enabling us to extend our footprint across the States,” said Swen Swenson, ISO Account Executive at Moneris Solutions, Inc.

Moneris Solutions’ Charge-It System® offers some of the best payment transaction processing solutions the industry has to offer. In conjunction with VeriFone, Hypercom, U.S. Wireless Data, and SurePay, to name just a few, Moneris Solutions enables businesses to accept a variety of payment methods, easily, quickly, securely, and at competitive prices. Moneris Solutions’ offering includes point-of-sale terminals, PC software, wireless and an eCommerce platform.

“Standard Payments is not another generalist selling merchant accounts,” said Trent R. Voigt, Chairman, Standard Payments, “but a specialist comprised of industry veterans conversant in systems integration, data networking, communications technologies, the Association’s Operating Regulations, and the growing array of related issues and concerns impacting the nation’s bankcard merchants.” Standard Payments’ President, David L. Tepoorten added, “We’re pleased to be associated with Moneris Solutions. We’ve selected a partner that shares our vision and is ideally positioned to support the delivery of our value proposition in today’s very competitive marketplace.”

About Standard Payments

Detroit-based Standard Payments, LLC is “Setting the Standard in Payments Delivery”® by providing card processing products and account support that enable its merchant clients to convert payment acceptance technologies into business solutions. Standard Payments is an industry specialist in merchant account acquisition and management, and deploys its recommended various payment options, payments strategies, and payment acceptance solutions and technologies for merchants nationwide. For more information, visit [][1]

About Moneris Solutions Inc.

Moneris Solutions is a leading North American technology company that was formed in December 2000 as a result of a joint investment between the Royal Bank of Canada Financial Group and Bank of Montreal. In less than a year, Moneris has over 300,000 North American customers; 18 ISO’s; a staff of 8700 employees; and offices in Chicago, Illinois; Toronto, Ontario; and Montreal, Quebec. For more information, visit [][2].


Daman Solutions Award

Daman Consulting, a pioneer in the growing Business Intelligence industry, announced it has received the Brio Excellence in Partnering Award. This award is given each year to just one company worldwide. Daman’s partnership with Drive Financial Services LP won the award for creating an interactive reporting and analysis solution.

“This is great recognition for Daman,” noted Norman Comstock, OLAP solutions director for Daman. “This award is a testament to Daman’s breadth of knowledge, not only in terms of Brio’s suite of tools and applications, but also in terms of the business needs at Drive Financial that were the impetus for creating a solution.”

Drive Financial is a financial services company that purchases retail installment contracts from a variety of car dealerships. Drive’s executives needed a reporting and analysis solution that would allow them to analyze key performance indicators down to the Associate level on a daily basis. Of course, Drive needed a solution that could be quickly deployed and deliver immediate results.

After purchasing Brio Intelligence software and Microsoft’s SQL Server, Daman Consulting was brought in to aid in the creation and implementation of the solution. A BI Gold Partner of Microsoft and a long-term partner of Brio Software, Daman quickly developed a plan for getting a solution up and running quickly. Within 90 days, Drive had the reporting and analysis capabilities it needed for its Servicing functions. The results came immediately: during the first month of operations there was an increase in both efficiency and overall performance within the Servicing group.

“I feel extremely positive with the results we delivered in working with Brio over a very short period of time,” noted Kevin Kleibrink, vice president of knowledge management for Drive Financial. “There is no question in my mind that the partnership created on this project has been extremely successful in delivering immediate results.”

The award program provides Brio partners the opportunity to be recognized and rewarded for significant contributions in delivering cutting-edge solutions and services using Brio’s technology. The Excellence in Partnering award recognizes a partner that utilized its implementation skills to deliver a total Brio solution. This award must be validated by a customer testimonial.

About Brio Software

Brio Software is the leading provider of next-generation business intelligence tools and applications that help Global 3000 companies achieve breakthrough business performance. Widely recognized as one of the easiest-to-use and deploy solutions in the industry, the Brio Performance Suite&trade expands business intelligence beyond advanced query and analysis technologies to include powerful information delivery through enterprise-class reporting and personalized performance dashboards. Used by nearly 70 percent of the Fortune 100, Brio products empower individuals, workgroups and executives in an organization to turn enterprise information into actionable insight, so superior decisions and business performance result. Founded in 1989, and headquartered in Santa Clara, CA, Brio products and services can be found around the globe at [][1].

About Daman Consulting

Daman Consulting provides advanced enterprise business intelligence solutions for a broad range of industries. Daman’s offerings enable enterprises to fully leverage information assets across all channels of corporate operation and communication. The Daman approach combines traditional data analysis, data warehousing, data access and OLAP implementations with more holistic services, which are geared towards integrating operational and analytical systems. These services include enterprise portal implementations, closed-loop analysis, intelligent enterprise integration, and adaptive information architectures. Greater profitability is the result of improved enterprise decision-making and responsiveness based on real-time business intelligence. For more information, visit Daman’s Web site at [][2].



The Tokyo-based Tobacco Institute of Japan announced this week it will launch
an age-recognition system by the end of 2008 that will use smart cards.
According to The Daily Yomiuri, trial tests are slated for April in
Chiba Prefecture. Eventually, about 620,000 vending machines nationwide
will be
replaced with new ones equipped with the smart card system. One hundred and
sixty machines with the new system will be introduced in April
in Yokaichiba, and will be tested for a period of one year.

Online Q4 Forecast

Online consumer spending will hit $10.7 billion in the fourth quarter, a 20.2% increase over last year. Compared to last year’s holiday season, 14.1 million more people will buy online this year between October 1st and December 31st. In 2000, online Q4 spending rose 71% over 1999. NYC-based eMarketer yesterday said that the deteriorating economy will negatively impact online sales and as a result e-commerce this year will be more closely aligned with general patterns of consumer spending. eMarketer projected that 58.7 million US residents will buy online, spending an average of $182.25


Ernex Marketing Technologies Inc. announced the general availability of
its new loyalty database hosting services.
The company also announced it recently completed the first full implementation
of the hosting service at Royal Bank of Canada where it is used for the bank’s
points-earning premium Visa credit card databases. The service provides the
bank with a complete, real-time, points management system. Ernex has been
providing Royal Bank and its stakeholders with highly flexible and powerful
tools to efficiently manage the administrative, help-desk, partner redemption,
and catalogue rewards management tasks involved with the bank’s five discrete
credit-card rewards programs. The real-time hosting service provides Royal
Bank’s operators and partners with timely and accurate cardholder data, a
flexible infrastructure for scalability and modifications, and significant
savings from administrative and operational efficiencies.


Ernex’s loyalty database hosting service is designed to make it more flexible
and efficient for credit card rewards program operators to administer the
points-management cycle. The new offering from Ernex is a core component in
company’s strategy to provide innovative, real-time solutions to credit card
issuers and large membership organizations in North America.
The rigidity of many legacy systems restricts the ability of loyalty database
program operators to easily or cost-effectively make modifications in their
programs. With many legacy systems relying on batched-processed data, manual
administration, or departments operating in silos, current and accurate
information is usually difficult to obtain. These challenges can have a
negative impact on customer service and operations. To mitigate these
challenges, Ernex provides a suite of software and web interfaces, allowing
operators to communicate and perform transactions in real-time with a central
authoritative database.

An added dimension to an Ernex-hosted loyalty database is the opportunity for
loyalty program operators to add real-time marketing capabilities to their
programs with ERNEX Accelerator. This solution provides a point-of-sale
interface to the hosted database, allowing program operators to extend their
programs to merchant businesses for more points-earning opportunities for
cardholders, real-time sweepstakes, and other retention and loyalty
directly at the point-of-sale. Royal Bank today utilizes Ernex’s loyalty
database hosting service in conjunction with ERNEX Accelerator – offering
cardholders more rewards and prizes at more than 160 participating
merchants in


Ernex provides a suite of loyalty database management tools and services to
efficiently manage the following areas of a rewards program:

1. Help-desk customer service: a web browser interface that
allows customer service representatives to perform cardholder
lookups, adjust accounts, and more.

2. Redemption: a web browser interface that allows redemption
partners to redeem cardholder points for merchandise, travel
or other rewards in real-time.

3. Rewards-catalog management: online hosting, website design and
maintenance service for rewards catalogs.

4. Reward fulfillment processing and auditing: a system that
administers and monitors orders with reward fulfillment
partners, and manages the billing and reporting issues.

5. Database synchronization services: a system that synchronizes
third party cardholder databases with Ernex loyalty database,
and supports statement production processes.

6. Reporting: an online information sharing solution for
redemption partners and program operators to view operational
and business level reports.

For more information on Ernex’s Loyalty Database Hosting Service, visit


Ernex Marketing Technologies is a provider of innovative real-time marketing
solutions for merchants, credit card and bankcard issuers, and large
organizations. Its solutions include loyalty programs, stored-value gift card
programs, reward fulfillment services and loyalty database hosting services.
For more information, contact Ernex at 877-GO-ERNEX or visit
Ernex is a wholly owned subsidiary of Royal Bank of Canada.

VeriFone Revenues

VeriFone, Inc. reported on its financial results for the first full quarter of operations as an independent company. The period begins on July 20, 2001, the date Gores Technology Group acquired VeriFone from Hewlett-Packard Company, and includes the full quarter ending October 31, 2001.

Revenues for the period exceeded $100M. Earnings from operations excluding interest, taxes, depreciation and amortization (EBITDA) exceeded 10% for the period. Revenues were strong in all regions with particular strength in the U.S. marketplace where the company recorded several competitive wins and multi-million dollar orders.

“We are very pleased with the results for our opening financial period,” said Douglas Bergeron, Chief Executive Officer, VeriFone. “Revenues exceeded $1 million per day and the company demonstrated strong profitability and very respectable margins. Our strategy to re-invigorate VeriFone has been extremely successful and we have achieved our goals ahead of schedule.”

Key achievements for the period include:

— A rapid return of the business to an entrepreneurial management style and organizational structure that competes more successfully and is more attentive to customer needs.

— The announcement of the Omni 3700 family of payment devices that feature EMV smart card compliance and multi-application capability in a compact all-in-one design.

— Key competitive wins and substantial shipments to companies including: Ahold, Citgo, Concord EFS, Global Payments Inc., KFC, National Processing Company (NPC), Pizza Hut, Sunoco, and TeleCheck.

— The redoubling of the company’s focus on the payment appliance marketplace and the sale of the company’s enterprise payment solutions business to Trintech.

Mr. Bergeron concluded: “Our results for the period compare very favorably, both in terms of revenue and profitability, to our nearest competitors. These results have quickly re-established our historic role as the leader, innovator, and largest provider of payment solutions in the world. We are grateful to our customers and employees for the confidence and belief in our mission over the past several months and welcome them to a new era of sustained growth and profitability in the months and years ahead.”

About VeriFone, Inc.

VeriFone, Inc., ( [][1]) is the leading global provider of secure electronic-payment solutions for financial institutions, merchants and consumers. VeriFone has shipped more than nine million electronic-payment systems, which are used in more than 100 countries. VeriFone, Inc. is held by Gores Technology Group, an international acquisition and management company.

About Gores Technology Group

With headquarters in Los Angeles, Gores Technology Group (GTG) is a privately held international acquisition and management firm that pursues an aggressive strategy of acquiring promising high-technology organizations and managing them for growth and profitability. GTG has a proven track record of acquiring and successfully managing companies — including many divisions acquired from large publicly traded companies — through its commitment to customers, employees and continued development of intellectual property. GTG has acquired and managed approximately 35 interrelated but autonomous technology-oriented companies with locations throughout the world. Those companies provide a broad range of technology-based products and services to a substantial customer base representing millions of active users worldwide. Visit the company’s Web site at [][2].

For further information on Gores Technology Group please contact Michael Sitrick, [email protected], or Terry Fahn, [email protected], both of Sitrick and Company, 310-788-2850.



Online retailing in Latin America continues
to develop and revenues are expected to reach $1.28 billion (U.S.) by the end
of the year-more than double the $540 million in revenues achieved in 2000 —
according to a new report released this week. The report is titled Online
Retailing in Latin America 3.0: Breaking Constraints. It was prepared by The
Boston Consulting Group and sponsored by Visa International, Latin
America and Caribbean Region.

Brazil continues to lead growth within the online retail market in Latin
America, with $906 million in revenues predicted for 2001. The country has
actually increased its share of the region’s overall online market from
62 percent last year to 71 percent in 2001. Mexico ($134 million), Argentina
($119 million) and Chile ($45 million) round out the top four major markets.

While in 2000 only two online categories had revenues exceeding
$100 million, in 2001 there were four. The largest is automotive, with direct
sales likely to reach $504 million. Consumer auctions — the largest category
in 2000 — will follow, at $203 million. In third and fourth place are
travel, at $140 million, and computer hardware and software, at $139 million.

In contrast to North American online retail trends, the online grocery
category is comparatively strong in Latin America, especially in Argentina and
Brazil, where many consumers are already accustomed to having groceries
delivered to their homes. With sales estimated at $79 million by the end of
2001, however, the online grocery revenue estimates are still dwarfed by those
of the top four. Still, the online grocery category is the only online retail
segment this year with penetration rates comparable to those in the United

“In a sluggish local and global economy, it’s surprising to note just how
much growth is occurring in the Latin American region, and this growth is led
by incumbents using the Internet to create competitive advantage,” said BCG
vice president Jorge Becerra. “In the automotive category, for example,
manufacturers in Brazil have launched direct-to-consumer ventures with
penetration rates-and gross sales-unmatched in any other market, making Brazil
the world leader in direct online auto sales.”

According to the report, a select group of Web-based and multichannel
retailers selling goods and services online are finding new opportunities
within the increasingly competitive online retail landscape and are learning
to penetrate their existing markets more effectively. A small number of
leaders have found creative, alternative ways to use the Internet, such as
stand-alone Web kiosks, to expand their online retailing reach to the majority
of Latin Americans who do not have access to computers. Others are
instituting secure payment systems to alleviate consumer security fears. In
general, however, weaknesses in the offering and continued challenges with
payment systems, fulfillment, and customer service continue to limit the
growth of online retailing in the region.

“According to the study, 66 percent of online purchases are made with
credit or debit cards, about half with Visa-branded cards,” said Mario Mello,
executive vice president, Visa International, Latin America and Caribbean
Region. “Visa has been in the vanguard in changing consumer and retailer
misperceptions about credit card fraud in Latin America. For example, the Visa
Authenticated Payment Program is a comprehensive e-commerce program designed
to ensure safe and secure online payment transactions for merchants,
consumers, and member banks. The Visa Secure Electronic Commerce program,
which was launched in Brazil last year, is another tangible way to make using
credit cards worry-free for consumers as well as online merchants. The
success of the program in Brazil has made it possible for Visa to roll it out
in Peru this year.”

To date, the solid growth of Latin American online retailing has been
impressive, but for the market to develop further, the report urges online
retailers to give consumers a richer, more focused, better-executed
experience. In last year’s report, BCG conducted a “mystery shopping”
exercise that found considerable room for improvement within the typical
online shopping experience. The same exercise was repeated this year, with no
significant overall improvement in three critical areas: payment, delivery,
and customer service. For example 95 percent of sites accept credit cards, but
to some extent both consumers and retailers continue to be wary of credit card
transactions, despite the increasing use of secure systems and digital
certificates issued by third parties.

Although it’s true that the Latin American economy has softened,
especially in Argentina, growth prospects for online retailing next year are
positive. The report cites several opportunities for growth, including the

* With an underpenetrated population in Latin America, it is possible to
bring more consumers online using Internet kiosks and other creative
solutions to cross the digital divide in the region.

* With online sales representing less than 1 percent across all retail
categories, there is certainly room for growth, even if total retail
sales decline.

* Certain categories, such as consumer auctions, offer a bargain-an
especially valuable proposition during adverse economic times.

Online Retailing in Latin America 3.0: Breaking Constraints is the third
BCG/Visa International report focusing on the online retailing industry in
Latin America. Survey results include data provided by 60 online retailers,
supplemented by company data from public sources.