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Bill Me Later allows web shoppers to pay for items through monthly installments on a line of credit provided by I4 Commerce, a 2-year-old company funded by credit card processing giants Paymentech and First Data Corp. and venture capital firms Azure Capital and Crosspoint.
Buyers who click on the Bill Me Later payment option on a checkout page provide only a birth date, which, along with the billing information they have already filled out, I4 Commerce uses to authorize the transaction. The purchase is authorized (or rejected) in about the same time as a credit card transaction.
By allowing for credit payment without using a credit card account number, Bill Me Later hopes to eliminate what consumers say-rightly or not-is one of the biggest obstacles to Internet shopping. “Security is the number one concern cited by Internet users who do not shop online,” Jim Ellis, director of merchant development, told attendees at the eTail conference in August. “And it helps explain why 52% of people abandon shopping carts on the web when they are asked for a credit card account.”
EBags.com, which has been offering the Bill Me Later option to customers since mid summer, believes that about 50% of customers who choose that option either don’t have credit cards or are maxed out on their cards, meaning the option has allowed it to save some sales. But with only 1% to 2% of customers paying with Bill Me Later, eBags can’t quantify the benefit. Peter Cobb, eBags’ director of marketing, characterizes the volume as acceptable, given that only 50% of shoppers see the option and it appears only deep in the shopping cart.
I4 Commerce expects to set its discount rate at about 1.5% vs. the 1.8% to 1.9% that major merchants pay Visa, MasterCard and American Express for web purchases.
What makes Bill Me Later a serious contender for web-based retail payments is the fact that First Data and Paymentech, which is co-owned by First Data and Bank One, together already process more than 80% of card-not-present credit card transactions. They have added Bill Me Later to their processing portfolio, the first such new payment option they have accepted since Discover Card in 1998. Bill Me Later also has established partnerships with a number of major e-commerce processors. “All any retailer needs to do to use Bill Me Later is upgrade to their payments processor’s latest software release,” Ellis says.
To date, Ellis says, I4 Commerce has approved 98% of Bill Me Later authorizations for buyers with credit cards, about the same approval rate as online credit card payment. And surprisingly, it has even approved-and thus granted credit to-about 35% of Bill Me Later applications submitted by purchasers who have no credit card.