March 31, 2010, 12:00 AM

More Ways to Pay

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Between 15% and 25% of transactions are paid through the private-label card, while 2.5% of transactions go through PayPal, says Tim Engle, senior vice president of strategic initiatives.

Brand power

Google put Google Checkout on the map in a big way when it offered online consumers discounts for using the newly launched service during the 2007 holiday season. Google also attracted merchants by offering discounts on their Google AdWords paid search campaigns that increased with the volume of Google Checkout dollar volume on a merchant’s site.

After Google phased out those consumer and merchant incentives, interest in Google Checkout eased, retailers and payment processors agree. “We did see a significant drop in customer adoption with the absence of incentives and branding promotions,” says Buy.com’s Wisot, declining to be more specific.

But Buy.com’s experience also shows the power of a brand like Google. Google puts a Google Checkout icon next to the search ads of retailers that accept its payment service, and that icon doubled the click-through rate on Buy.com’s ads, Wisot says. “It helps capture the user’s attention,” he says. “The graphic helps our ads stand out, while at the same time acting as an endorsement from Google to Google users.”

PayPal, which is owned by eBay Inc., also can bring in traffic from brand loyalists. While PayPal only accounts for a small percentage of purchases at JTV.com, 60% of PayPal users are new customers, Engle estimates. That’s the kind of boost that can justify the cost of implementing an alternative payment system, which in the case of PayPal could approach $19,000 for a $200 million online retailer, according to research and consulting firm Forrester Research Inc.

Heavyweights arrive

The power of major brands will get a test in coming months as some major card brands and online players push their payment methods. While many of them are not true alternatives in that the consumer ultimately pays with a credit or debit card, they each offer a new brand-and typically require some integration work on the retailer’s part.

Visa Inc. has announced it will launch this spring Rightcliq, an electronic-wallet service that allows consumers to store payment card and shipping information for use at web retailers. Rightcliq will enable consumers to comparison shop, track deliveries, keep wish lists and receive coupons from web merchants, Visa says.

So far, analysts and merchants have greeted Rightcliq with little enthusiasm. “We’re not very impressed from what we’ve read,” says Wisot, adding that Buy.com already offers a price comparison feature.

American Express last year paid $300 million to acquire Revolution Money, a four-year-old fledgling card network that aimed to appeal to merchants with fees well below those of Visa and MasterCard. Revolution’s typical fee is 0.5% of transaction value; Visa and MasterCard rates start at around 2% and total fees, including processing costs, can go up to 4% to 5% for smaller merchants, says Jay DeWitt, a partner at payments consulting firm Glenbrook Partners.

American Express plans to build Revolution into a reloadable, prepaid offering that consumers could use instead of other payment alternatives and to pay on social networks and for mobile purchases, says an AmEx spokeswoman, who declined to provide more details.

Meanwhile, Amazon last fall enhanced its Checkout by Amazon option that lets consumers pay at other retail web sites with their Amazon credentials. Amazon added PayPhrase, which lets consumers choose recognizable phrases and then link them to different shipping addresses, so that one phrase could be for shipments to home and another to an office, for instance.

And Google, whose commitment to Google Checkout seemed to wane of late, signaled a renewed interest in online payments with its recent hiring of former eBay executive Stephanie Tilenius, who at one time headed PayPal. She will hold the newly created post of vice president of commerce. Combined with Google’s launch of its own e-commerce site selling its Nexus One mobile phone, and announced plans for other retail sites, the move suggested Google’s increased focus on e-commerce, including payments, observers say.

These companies already have the brand recognition. Now they have to show they can translate that into an online payment offering that will appeal to online shoppers, and finally mount a serious challenge to PayPal.

thad@verticalwebmedia.com

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