Master Card, Visa or...Bill Me Later?
My wife has found a new way to shop online!
No, this is not yet another stereotype about the shopping habits of my better half - to be honest, I am more of a compulsive (and impulsive) shopper than she is! She recently found a payment option called "Bill Me Later" while checking out on an e-tailer's site and I thought that was a concept worthy of some discussion on these pages!
I had posted a piece about settling personal IOUs on the web earlier, here. Similarly, Bill Me Later is the more institutionalized form of paying for one's purchases without the traditional plastic instrument that we have all grown accustomed to use.
No, this is not yet another stereotype about the shopping habits of my better half - to be honest, I am more of a compulsive (and impulsive) shopper than she is! She recently found a payment option called "Bill Me Later" while checking out on an e-tailer's site and I thought that was a concept worthy of some discussion on these pages!
I had posted a piece about settling personal IOUs on the web earlier, here. Similarly, Bill Me Later is the more institutionalized form of paying for one's purchases without the traditional plastic instrument that we have all grown accustomed to use.
Bill Me Later offers US customers of most major online merchants —Walmart.com, Overstock, and most recently Amazon — the chance to make online payments sans a credit card. After selecting the Bill Me Later option, customers simply enter the last four digits of their (US) social security number and their date of birth. Those with qualifying credit scores have an account created in their name. This account tallies purchases made using the Bill Me Later option. Payments can then be made on the account using traditional (read safe) “snail-mail” methods like a check, or online at BillMeLater.com.
So why has Bill Me Later gained salience with so many leading online merchants?
In a recent survey conducted by TNS Sofres, a media analytics organization, 44% of Americans stated that they were worried about using their credit card to make online purchases. Cyber ‘Phishing’, hackers and identity theft horror stories all play on the fears of those who are considering making online purchases.
You can imagine the frustration of online merchants who consistently find that a large percentage of their potential market consists of consumers who are afraid to pay. You can also imagine the opportunity that this creates for alternative payment methods like PayPal, Google Checkout and Bill Me Later.
By providing consumers one account to shop with, Bill Me Later (like similar services from PayPal and Google Checkout) consolidates payments. This consolidation minimizes the chances of credit card fraud, and increases the confidence of fraud-wary consumers in online payments. Another benefit: Bill Me Later offers lower fees to merchants, often undercutting credit cards by as much as half a percent. This last point is particularly critical, given the recent US Federal Ruling on providing more bargaining powers to Retailers over credit card interchange fees (Read related article here). It points to a weakening of the stranglehold that networks like Visa, Mastercard etc., have on the consumer payments segment.
Alternative payments services also combat shopping cart abandonment. Research by Marketing Sherpa estimates that 53% of online shoppers fill up their online shopping cart, only to navigate away from the web page and not follow through with the purchase. Bill Me Later, PayPal and Google Checkout simplify the checkout process, reducing abandonment and increasing conversion rates.
As E-Commerce continues to grow in popularity and scope, expect online payments to grow more convenient and secure. Alternative payment services will play a big role in what I term, "creative discontinuity", providing better options to merchants and consumers; along with Regulation, this will push credit card networks to innovate, which will ultimately benefit the consumer.
To stay in tune with what else is happening in the Payments world, be sure to check out the next issue of FINsights, Infosys’ Thought-Leadership journal on the financial services industry; for past issues, click here. .
So why has Bill Me Later gained salience with so many leading online merchants?
In a recent survey conducted by TNS Sofres, a media analytics organization, 44% of Americans stated that they were worried about using their credit card to make online purchases. Cyber ‘Phishing’, hackers and identity theft horror stories all play on the fears of those who are considering making online purchases.
You can imagine the frustration of online merchants who consistently find that a large percentage of their potential market consists of consumers who are afraid to pay. You can also imagine the opportunity that this creates for alternative payment methods like PayPal, Google Checkout and Bill Me Later.
By providing consumers one account to shop with, Bill Me Later (like similar services from PayPal and Google Checkout) consolidates payments. This consolidation minimizes the chances of credit card fraud, and increases the confidence of fraud-wary consumers in online payments. Another benefit: Bill Me Later offers lower fees to merchants, often undercutting credit cards by as much as half a percent. This last point is particularly critical, given the recent US Federal Ruling on providing more bargaining powers to Retailers over credit card interchange fees (Read related article here). It points to a weakening of the stranglehold that networks like Visa, Mastercard etc., have on the consumer payments segment.
Alternative payments services also combat shopping cart abandonment. Research by Marketing Sherpa estimates that 53% of online shoppers fill up their online shopping cart, only to navigate away from the web page and not follow through with the purchase. Bill Me Later, PayPal and Google Checkout simplify the checkout process, reducing abandonment and increasing conversion rates.
As E-Commerce continues to grow in popularity and scope, expect online payments to grow more convenient and secure. Alternative payment services will play a big role in what I term, "creative discontinuity", providing better options to merchants and consumers; along with Regulation, this will push credit card networks to innovate, which will ultimately benefit the consumer.
To stay in tune with what else is happening in the Payments world, be sure to check out the next issue of FINsights, Infosys’ Thought-Leadership journal on the financial services industry; for past issues, click here. .
For more information on how Bill Me Later works, check out their FAQs page here. I realize that most of my narrative is US-centric and I am keen to hear more from you on what is going on in other global, emerging markets. Of particular interest to me is the whole area of mobile payments, given that mobile phones are probably becoming (if not already!) the most ubiquitous consumer product (Refer to Mohit Joshi's post earlier, here)!
Comments
Aside from the pain of creating yet another account with another company, this payment option is actually very good for the many people worried about online security & privacy. It's really nice to at least be given a secure option for payment.
Posted by: home shredder | July 21, 2008 04:57 PM