May 5, 2004, 12:00 AM

How can I pay? Let me count the ways

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When it does, it might want to take some cues from “Wal-Mart does a good job of explaining how to use e-checks,” says Jan Whitfield, vice president of e-commerce for Certegy. “We recommend other retailers to display e-checks the way does.” has designed pop-up messages that help train consumers how to use e-checks. It also presents a replica of the check online, and makes it easy to enter routing and account numbers, Whitfield says. Most other personal information about the customer is stored as part of the customer’s initial registration process, so a customer only needs to fill in bank routing and account numbers, driver’s license number and date of birth.

A Certegy e-check system can cost about $10,000 for complete system integration required by many larger retailers, though smaller ones may opt for a simpler browser-based plug-and-play application, Whitfield says. In addition, there are application set-up fees and a transaction discount rate similar to that charged by credit card companies. Overall costs can also depend on the amount of custom reporting a retailer wants to access to view transaction data.

The de facto standard

Similar advantages in serving customers are associated with PayPal and Bill Me Later, which provide merchants with immediate payments while offering consumers the option of paying the third-party service through checks, money orders or credit cards.

PayPal’s popularity has grown partly through its association with, where it operates as a common payment vehicle for customers of thousands of sellers on eBay who don’t want to acquire merchant status from credit card companies. To make online purchases with a PayPal account, consumers first fund their account; then PayPal processes an immediate payment on their behalf, providing the merchant with an assurance of payment without the risk of fraud or bad credit. Merchants pay a percentage of the sale to PayPal.

The PayPal fees are worth the expense because the service has become increasingly popular with consumers, retailers say. “PayPal has become almost a de facto standard on the web for non-credit card payments,” Paul says. A main reason PayPal has emerged as a leading third-party player over other services is its ease of use, he adds. For example: To increase security, PayPal offers consumers the option of conducting payment transactions with a virtual account number for use in a single transaction. Although PayPal connects the one-time number behind the scenes to the customer’s actual account information, having only the one-time number showing in the transaction makes theft of the customer’s account information during the transaction virtually impossible, Paul says.

Another third-party service growing in popularity, I4 Commerce’s Bill Me Later, is earning strong marks from a range of merchants. Provide Commerce Inc., which operates and other web sites offering perishable products, says Bill Me Later transactions are less costly to administer than other payment methods and make some customers feel more secure when buying online than when using credit cards. reports booking 10% higher average orders from customers using Bill Me Later, and jewelry retailer Ross-Simons reports increases in both average order size and number of new customers as a result of offering the invoicing payment option. For Ross-Simons, this has led to a double-digit increase in incremental says, says Cindy Marshall, vice president of marketing.

But Bill Me Later is as much a customer relationship tool as a tool for increasing sales, Provide Commerce says. “Through customer research, we have found that the primary reason customers use the Bill Me Later option is for security purposes,” a spokeswoman says. “So this is essentially a group that would rather not use a credit card for online payments.”

No increased risk

Paul of TigerDirect adds that Bill Me Later is also growing in popularity among consumers because it can be an easier way to get credit. “Without having to go through a full credit card application, I4 Commerce offers a quick and easy application,” he says. “But we haven’t seen riskier consumers coming through Bill Me Later.”

Bill Me Later is currently offered by 24 merchants, with 16 more expected to sign up by the end of this year, says Mike Lavelle, vice president of business development for I4 Commerce. Bill Me Later accounts for 3-7% of its client retailers’ overall payments, Lavelle estimates. While merchants offering Bill Me Later today tend to be larger retailers, I4 Commerce expects to begin building its base among small merchants as well, he says.

In addition to the benefits some retailers report in higher sales and average order size, Bill Me Later also offers merchants some of the financing flexibility more commonly associated with in-house financing or private label credit card programs. For example, merchants have the option of offering consumers free credit for 90 days, instead of the usual deal of letting customers pay after the first month.

When an online retail customer clicks on the Bill Me Later icon to make a payment, she enters the last four digits of her social security number and her date of birth, clicks a button to accept Bill Me Later’s terms and conditions, then waits about three seconds or less to get an authorization, Lavelle says. She receives a bill from Bill Me Later within 7 to 15 days, then has a 25-day grace period before Bill Me Later incurs interest charges of 17.99%.

Merchants pay I4 Commerce transaction fees that run 30-40% less than similar fees charged by credit card companies, Lavelle says.

But for all the advantages of offering multiple payment options, retailers can’t escape its challenges. For many retailers, the challenges appear to be more than they want to take on: less than half-47% of merchants surveyed by CyberSource-offer more than two payment methods for online purchases.

The first step toward offering multiple payment methods is deciding which to offer, though merchants who have taken the multi-payment approach say that can be easy if a retailer is willing to listen to customers. “The main thing for us was that this was customer-driven,” says Rolf of, which began accepting e-checks last summer. “We got calls into our customer service center from customers who said they wanted to pay by check, but dealing with paper checks for online orders is not a good way to go.”

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