Online Payment Options
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In 2000, credit cards accounted for more than 90 percent of online payment volume-but by 2009, less than half will come from credit cards, according to a May 2006 study by Boston-based Celent LLC. The gradual shift away from credit card payments is due in large part to the fact that alternative payment options are typically less expensive for merchants to use.
"[It] is unsustainable for credit cards to maintain their dominant presence [in] the model as it is today because it is simply too costly for e-tailers," says Dan Schatt, a senior analyst at Celent. In addition, "There are large numbers of consumers sitting on the sidelines, not willing to make an online transaction because they fear their credit card information-or any information they leave with the merchant-will be misused."
Enter alternative online payment options like Bill Me Later, which allows customers to pay for their items later or in installments, and eBay's PayPal, an inexpensive choice that doesn't require consumers to enter any personal information. Bill Me Later and PayPal have already risen in popularity. Here's a look at some other up-and-coming solutions.
PIN debit: This option, which is just starting to appear on the internet, lets consumers use their PIN numbers to make secure debit purchases on the web. Users must have a terminal to swipe their debit cards at home.
Google Checkout: Introduced by Google this summer as a PayPal competitor, the service is designed to function as an electronic wallet that will enable consumers to buy products and services from online merchants without repeatedly entering the same personal and financial information at each store. Users with a Google account enter a credit card number along with a few other details, and the company will deliver the payments to any participating merchants, which must advertise on the search engine to participate. See http://checkout.google.com.
ACH Consumer Push: This innovative initiative from The Electronic Payments Association, or NACHA, is expected to launch in late 2007. It will allow for Automated Clearing House-based e-commerce transactions with the added security of authentication by consumers' online banks. During checkout, consumers log in to their online bank to authenticate themselves, and the transaction is then secured by this authentication.
Melissa Campanelli is a marketing and technology writer in New York City.