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Though 90% of purchases made on GiftTree.com are paid with credit cards, Craig Bowen, the site’s president, would like to see that percentage drop and more consumers use debit cards or alternative payment methods such as PayPal.
Though 90% of purchases made on GiftTree.com are paid with credit cards, Craig Bowen, the site’s president, would welcome growth in other payment methods, such as PayPal or debit cards.
The reason? In large part, the attitude of credit card issuers and networks. “They don’t give us enough tools for fraud prevention,” says Bowen, who oversees the 13-year-old e-commerce site that sells such products as fruit and wine gift baskets, flowers, mugs, and chocolates. “It’s a real one-sided relationship.”
For instance, he would like to see a stronger effort from card networks to maintain a list of stolen credit card numbers. Such information would bolster his staff’s own efforts to flag potentially fraudulent orders placed through the web site, where the average transaction is between $60 and $70. The retailer’s fraud rate stands in the low single digits, Bowen says.
Credit cards remain the most popular way to pay for consumers’ online purchases, according to a study last month from Javelin Strategy & Research. Credit cards captured 43.5% of the online total payments volume in 2009.
But online shoppers lately have crept away from credit cards, thanks to the recession and the resulting tightening of credit limits, high household debt and federal legislation that restricts credit card marketing and issuance. Javelin estimates the share of credit card payments for online purchases will decline to 39.4% in 2014.
That presents an opportunity for other forms of payment, including debit cards, prepaid and gift cards, and so-called alternative payment methods, a category that includes PayPal, Google Checkout, Moneta and other schemes. GiftTree.com started accepting PayPal about two years ago, and the service, owned by eBay Inc., accounts for perhaps 5% of transactions, Bowen says. Consumers can link PayPal to bank accounts and debit and credit cards to enable payments for online goods and services.
Last fall, GiftTree.com also began accepting another alternative payment method, Moneta. That service enables payments from customer bank accounts, with payment processing going through the automated clearinghouse system, which banks use for low-cost funds transfers. A customer registers an online ID with Moneta, while merchants pay a percentage of the transaction that typically is no more than 1.5%. Web merchants typically pay anywhere from 2% to 5% of the transaction amount when the customer pays with a credit card. Moneta has 30 merchants using its service, a number that CEO Guido Sacchi expects to exceed 100 by year’s end.
Though Moneta has a long way to go before gaining the popularity among GiftTree.com customers that PayPal has earned, Bowen says he might work with Moneta on a combined marketing effort. For now, the Moneta icon, along with that of PayPal and five major card brands, appear on the GiftTree.com home page. He says he is open to the possibility of adding more payment methods, too.
“For all these alternative payment methods, we don’t know which one will succeed the best, but they will proliferate,” Bowen says.