As in the offline world, consumers are shifting from credit to debit payment online, with debit transaction volume expected to surpass credit transactions online by 2007. That has important implications for online merchants and card issuers, according to a new report from Jupiter Research, “U.S. Online payments Forecast, 2005 to 2010.”
Offline, consumers are moving toward debit vs. credit card use as a substitute for using checks. Also driving growth are consumers’ increasing familiarity and comfort level with this payment option, and that fact that debit cards don't carry finance charges as credit cards do, according to Jupiter.
Offline, a signature is required to authorize a debit transaction – an option that doesn’t exist online. PIN debit transactions, another means of user authentication aren’t typically used online due to security concerns, and security concerns also have so far limited the growth of PIN-less debit transactions.
As a result of those concerns, the predicted increase in the use of debit cards online means that online merchants must be even more rigorous about fraud and risk management, Jupiter analyst Edward Kountz notes. Merchants should increase their use of automated fraud management tools and consider bankcard associations’ online second-level authentication programs, so far little used.
To reduce the risk of online debit transactions while accommodating consumers' desire for online debit transactions, Kountz also encourages merchants and card issues to start exploring investing in platforms for Internet PIN debit.
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