Plastic Not the Only Payment Choice Online
For a variety of reasons, some consumers prefer to use so-called
alternative payment methods to buy goods online.
While making use of services
such as PayPal, Bill Me Late and Google Checkout may not have been the first
choice of consumers who prefer to use credit cards, a significant and growing
number of shoppers are preferring to go the alternative payment route.
According
to a Multichannel Merchant report from the eTail 2009 conference, Bruce
Wolansky, vice president of global e-commerce for Orvis, felt “almost
embarrassed to slap a Bill Me Later logo” on his company’s site back in 2005.
That discomfort turned out to be short-lived as Mr. Wolansky found consumers
responded to having another choice they could use to purchase goods. In fact,
according to Mr. Wolansky, the average credit card consumer spends $150 on
Orvis.com while Bill Me Later users spend $175.
Tim Engel, vice president of
strategic initiatives for JTV.com, told
eTail attendees that between 15 and 30 percent of the online jeweler’s sales
are made with a form of payment other than credit cards.
Julie Katruska, director
of finance for AEO Direct, said she only saw one drawback to using alternative
payments. The company cannot take PayPal returns in its stores. “We can offer
the customer cash back or a store credit,” she was quoted by Multichannel
Merchant. “But
we can’t process a return in-store with an alternative payment.”
Discussion Questions: What do you
see as the biggest factors behind the growth in alternative payments online?
What are the pluses and minuses for merchants associated with the use of alternative
payment options? Will we see the use of these alternative payments migrate to
brick and mortar locations?
Ease of use, flexibility and adaptability make these options appealing. Plus there is a sense of security, for those who stop to think about it. Sure, the alternate systems can be broached, but your main bank or credit card account is insulated by the extra layer. I think there is also a similarity between these payment options and the old envelope method of budgeting. These virtual envelopes are so this millennium.
A lot of people got bitten (badly) by the credit bug and I think people are really just trying to buy with more cash now than credit.
I think what we’ll see in-store is a greater percentage of sales through debit/check card and cash and I can also see lay-away plans make a comeback.
In the same way the GI generation lives with the scars of the Depression, I think boomers and gen X will live with memories of this recession. And the credit crisis that precipitated it.
Offering as many payment sources as possible just makes sense. E-Commerce websites put a lot of effort into getting consumers to make purchases. Why not help complete the purchase by giving the consumer payment options? We advise our Internet retailer clients to offer as many as possible.
As an online retailer, I have a very practical way of looking at this. I want to offer my customers as many ways as I can to make a payment. Sure, some of these services cost the retailer more than others, but offering a choice increases the chances we’ll make a sale. We accept the four major credit cards through our secure payment gateway. But we also accept electronic check payments, PayPal and Google Checkout, and our customers have used every option we offer. I was an early PayPal user–I have been accepting it for about eight years now as a payment method.
Increased payment options provide significant benefits to consumers in the form of increased flexibility and choice. Furthermore, I believe that the new options could very well be the backbone for the growth of mobile enabled transactions in the future. Greater payment options, qualified and monitored through risk, will ultimately increase as the economy rebounds.
If you read my blog (www.paymenttalk.blogspot.com) you will find many comments about alternative payments. In general, they appear to be attractive for security and convenience but one or both of those attributes are more an illusion than reality. There are really only two (both now owned by eBay) that have actually reached anything approaching critical mass, PayPal and Bill Me Later. PayPal was simply first and therefore has achieved a critical mass of users and Bill Me Later was appealing for its catchy name, alternative credit line and most importantly how it creatively got around the enrollment issue.