The Landscape of Internet-Based Payments

by Mercator Advisory Group 0

Credit card payments are the backbone of ecommerce transactions, although not every site accepts all credit card brands. While almost all online retailers accept Visa, MasterCard, and American Express, only a few accept Discover, JCB, or Diners. Additionally, China Union Pay (previously only accepted in China) is now accepted in more than 100 countries. Large retailers also accept private-label and co-branded credit cards. Private-label cards are branded by a specific retailer, and can only be used to purchase goods and services from that retailer. Co-branded cards are issued collaboratively between a large retailer and a card network, such as Visa or MasterCard. These cards are generally associated with a consumer rewards program provided by the retailer.

PayPal has also become a staple for ecommerce payments, supported by most large retailers. Consumers who use PayPal for online payments are not required to create an account on the retailer’s site, which many consumers find attractive. Google Checkout has been around for a few years, but it does not have the usage level of PayPal. This may change as Google Wallet continues to develop.

Consumers can also pay directly from their banking accounts. Vendors such as eCheck and Western Union will provide checks or money orders directly to the merchant. Consumers who prefer not to provide credit card information online tend to appreciate this option.

Another increasingly popular payment method is instant financing. Companies like PayPal-owned Bill Me Later provide consumers credit to purchase a good or a service while delaying payment. Additionally, some larger retailers provide this service independently. Some, such as Apple, are partnering with financial institutions (in Apple’s case, Barclaycard) to provide the financing, while others, such as Dell, finance the purchase themselves.

Retailers are also offering an increasing number of methods to pay and accept payments via mobile devices. Google Wallet and ISIS are using near field communications (NFC) to enable POS payments. Companies like Square and Intuit are providing attachments called “dongles” that plug in to smartphones and tablets that enable merchants to accept card based payments via the mobile device. Finally, vendors such as Boku and Zong allow consumers to pay for goods and services by having the fee added on to their phone bill.

Additionally, a large number of newer payment methods are currently being considered by a number of retailers:

You can offer subscription payment methods that bill the customer a fixed amount every week or every month. Shoedazzle andBirchbox, for example, use this subscription model… Dwolla is a U.S.-based private payment network that is gaining in popularity; merchants who use it pay a flat 25-cent fee for every transaction over $10. There are a number of international payment company — such as Klarna, PayEx, ClickandBuy, AfterPay, Konbini, Boleto Bancario — that are being used by large global retail sites. If your site does business internationally, then supporting some of these payment methods will better meet consumers’ needs.

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