October 21, 2010, 4:10 PM

For ‘alternative’ payments, consumer demand outpaces merchant offerings, report says

Javelin finds that 54% of consumers have used PayPal and other methods for online purchases.

Lead Photo

PayPal is launching Mobile Express Checkout, the alternative payment method's latest offering.

Consumers want to pay online with something other than plastic, but e-retailers have been slow to adopt alternatives to credit and debit cards, suggests a survey recently released by Javelin Strategy & Research.

Javelin found that while 54% of consumers have used payment methods such as PayPal, Bill Me Later, Google Checkout and Checkout by Amazon, only 35% of merchants offer such payment options. The research firm based its findings on surveys conducted in July and August of 60 merchants; Shop.Org, the online retailing arm of the National Retail Federation, also helped conduct the survey. Javelin also surveyed 3,294 consumers in November.

“Merchants are not meeting consumer demand for alternative payment options and may, at the same time, be tangentially keeping their transaction processing costs at a higher level than necessary,” says the report, written by Beth Robertson, Javelin’s director of payments research, and Aleia Van Dyke, a research associate. About two-thirds of merchants say they pay less for the processing of alternative payments than for traditional methods such as credit cards.

The report also notes that 38% of merchants say average order values for consumers using alternatives are higher than for consumers using major brand credit and debit cards. Nonetheless, the report says, only 6% of online purchase are made with alternatives to major brand credit and debit cards.

By far, PayPal is the alternative payment method with the widest reach, offered by 95% of merchants that accept nontraditional payment methods. Next up are Bill Me Later and Google Checkout, each with 33%, then Checkout By Amazon, 10%. Both PayPal and Bill Me Later are owned by eBay Inc.

PayPal continues to challenge other providers by forcefully building out its product to add merchant and consumer value and augment its market reach,” the report says. “However, given the relatively nascent alternative payments landscape, other payment providers have ample opportunity to capture market share.”


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