High transaction and charge-back fees from Visa and MasterCard, as well as the desire to cater to consumers who don't use credit cards, have prompted many e-merchants to consider alternative payment mechanisms for their sites. Focusing on payment methods whereby the consumer's telephone, Internet service provider (ISP), or wireless provider bill is charged, this article is the first in a series examining the various services available for conducting online transactions by means other than credit cards.
Why Credit Cards Alone Don't Work
Many e-merchants would like to offer their customers more payment options than just credit cards. They're tired of paying the bill for online credit card fraud and the exorbitant charge-back fees that card associations charge.
They also want to reach the substantial number of consumers who don't pay with credit cards, such as teens and consumers in those countries where credit cards are not commonly used. According to a recent report by Forrester Research, 39% of Internet users who have never made an online purchase point to the lack of owning a credit card as the primary reason for not buying. This is a significant percentage, representing a huge loss of revenue for e-merchants.
A number of companies are creating businesses that provide safe, secure, cost-effective alternatives to the credit card payment method. One new online alternative payment method makes use of existing relationships between consumers and "trusted billing intermediaries" (TBIs) - such as telephone companies, ISPs, and wireless providers that already bill and receive regular payment from consumers.
How It Works
Here's how payment services use TBIs to bill consumers for online purchases:
In order to work, these payment services need both TBIs and merchants to subscribe. It takes time to establish wide networks, and the payment services are scrambling to create them. But the current reality is a fragmented system, where merchants' payment offerings and consumers' ability to use the services offered don't always match.
Many start-ups are gunning to become the payment service of choice using TBIs. But two companies - eCharge Phone and WiSP Classic - currently stand out as the most viable companies in this arena. Here is how they work and the features they offer:
eCharge Phone has been able to secure a strategic deal with AT&T that gives it access to a huge existing network of TBIs - local telephone companies. That means that any consumer should be able to use eCharge to pay for an online purchase through his or her local telephone bill. But consumers' shopping choices are limited to those sites that have signed up with eCharge. Building a network of merchants is one of eCharge's largest challenges.
WiSP is in the process of developing a network of ISPs and wireless providers that will subscribe to its service. It has two advantages that may help it build a network of merchants more quickly than eCharge: WiSP is closer to launching payment services for the purchase of tangible (hard) goods, and it pays merchants as quickly as credit card companies do.
Services such as eCharge Phone and WiSP Classic are viable, secure means of payment for consumers wishing to buy online without using a credit card and for the merchants who wish to provide this option. These services address some major problems before they become major players in the alternative payment market. But as their networks strengthen and they become able to handle the purchase of tangible goods, these payment methods are likely to become a popular means of conducting online transactions.
Copyright © 1995-2000 Pinnacle WebWorkz Inc. All rights reserved. Do notduplicate or redistribute in any form.