May 31, 2006, 12:00 AM

Credit cards are losing online market share to alternative payment options

Alternative online payment options are chipping away at credit cards’ hold over online retailing, says Dan Schatt, analyst at Celent Communications, who will speak at IR2006. Less than half of e-commerce dollar volume will come from credit cards in 2009.

 

Alternative online payment options-such as PayPal, Click and Buy, and Bill Me Later-are chipping away at credit cards’ hold over online retailing, says Dan Schatt, analyst at Celent Communications. Less than half of e-commerce dollar volume will come from credit cards in 2009, down from 96% in 1999, he says.

That gradual shift to non-card payments is due in large part to the fact that alternative payment options are typically less expensive to merchants than credit card acceptance, Schatt says. He notes that about 30% of PayPal’s business takes place away from eBay.

PayPal, a subsidiary of online auction giant eBay Inc., was originally developed for use in online auctions. But now PayPal offers a full-range of merchant services, including domain registration, web site service, shopping cart, web site hosting through eBay, gateway, and merchant acquirer.

PayPal also recently launched PayPal Mobile, a text-message-based service allowing consumers in the U.S. and Canada to make purchases via mobile phones using their PayPal accounts. “It’s a terrific move from PayPal and eBay alike because it extends their natural core competency of basically facilitating payments in e-commerce and extending that to a terrestrial realm,” Schatt says.

Schatt, who is speaking at the Internet Retailer Conference & Exhibition June 5-7 in Chicago, recently completed a study of alternative online payments. He will discuss his findings in a session entitled “Alternative Payments: Moving Beyond Credit Cards Only” at 5 p.m., June 6.

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