In its second-largest acquisition, Amazon buys the company for $970 million.
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By contrast, TigerDirect has taken a more aggressive approach. It added PayPal after getting many requests for it from customers, but it has added other payment methods as part of its policy of offering customers as many choices as possible.
Once the decision for multiple payments is a go, the next chore is figuring out how to get connected with more payment services. The web, however, is making this an easier task than in the past, experts say. “You no longer need a dedicated line to Visa and every other payment service,” says Paul. “It’s all pretty standard on the Internet these days, using a virtual private network on the web.” He notes that TigerDirect’s in-house IT staff took less than a month to set up connections for each payment method. “It’s really not a problem,” he says.
Once the merchant has made the decision to offer multiple payment methods, there are additional administrative chores, including fraud management and monitoring conversion rates and average order sizes for the different methods.
TigerDirect built network connections for each of its payment methods, Paul says, but retailers also can use an outside service provider, such as CyberSource or Paymentech, to provide the multiple connections and consolidate transaction data for a single administrative view.
$10 billion more
Paymentech’s new eCheckSelect suite of payment services, for instance, can handle multiple payment options, including e-checks, automated clearinghouse transactions, consumer identity authentication and data validation. It also integrates with eFunds Corp.’s Shared Check Authorization Network, or SCAN, to check records of bounced checks, and it uses eFunds’ ID Verification service to match checking account numbers with consumer databases of names and addresses. Paymentech also processes Bill Me Later transactions.
Paymentech also offers custom reporting to let merchants see how many transactions it conducts daily through all of its payment methods. “The merchant gets online reports broken down by method of payment, so they know what they did in MasterCard, Visa, Bill Me Later and e-checks,” DePalma says.
Getting a good look at how a merchant is spreading out payment options for its customers can help put it on a track toward higher returns, experts say.
CyberSource, by applying its survey findings to the entire business-to-consumer sales channel, figures online retailers offering only one or two payment methods may have lost in aggregate $8-$10 billion last year due to higher shopping cart abandonment rates.
They may be small, but micropayments arecommanding more attention
For years, micropayments have held out the promise of letting Internet merchants cash in on sales of low-priced items to large numbers of consumers. But it has taken the onset of online music, games and other digital content-and now, with a boost from cell phones-to create an actual though still limited market large enough to attract attention of both merchants and buyers as well as a growing number of micropayment processors.
The value proposition of micropayments is to make it worthwhile for retailers to sell digital content and other products for $1 or less. And with more consumers buying digital music online at a common rate of 99 cents per song, a new range of micropayment services is becoming available. Paymentech L.P., for example, established last fall an alliance with micropayments processor Yaga Inc. to offer micropayments as an option to web merchants. Paymentech says it processes more than half of North American Internet payment transactions.
Peppercoin Inc., a new micropayments company, released a survey last fall that found that 4 million U.S. consumers had purchased digital content at less than $2 per purchase in the prior 12 months. It also projected that 30 million consumers were likely to purchase digital content this year. Jupiter Research projects that micropayments will reach $677 million by 2008, driven mostly by digital music purchases.
Paystone Technologies Corp. is offering a hosted, web-based micropayments application that charges no set-up or monthly fees. It charges transaction fees of 5% plus 10 cents for transactions valued from 25 cents to $5, and 3% plus 30 cents for transactions valued $5.01 to $500. For a 25-cent transaction, the fee would amount to 11.25 cents. Other micropaymet services include PayPal and Bitpass.
Not everyone is sold on the business case for micropayments, however. Lonny Paul, director of e-commerce for TigerDirect.com, says he doesn’t see a long-term market for them. Paul will take a pass on micropayment services even though he’s planning to launch a co-branded site with Zingy Inc., a major provider of digital content for cell phones. The new site, which will operate within TigerDirect.com, will let consumers download to their phones digital songs, games, ringtones and other content at prices of $2 or less. Figuring he’ll pay about 6 cents in credit card fees for a $2 charge, Paul says he sees no advantage in supporting micropayments.
A better option for supporting digital content purchases, he says, is the sale of stored-value cards that teenagers can buy in stores or online in lieu of using credit cards. “Zingy has been one of the leaders in offering those cards,” he says.
Click here for the Internet Retailer Guide to Payments Processing Solutions