The Series B round for Witherspoon’s Draper James brand was led by San Francisco-based Forerunner Ventures.
Higher debit costs will lead to more credit card transactions by 2016, Javelin says.
The payment forms consumers use to make their online purchases will shift over the next five years as debit card use declines and more consumers pay with credit cards and online alternative payment services like PayPal and Bill Me Later, according to a new payments forecast from Javelin Strategy & Research.
“The Online Retail Payment Forecast 2011-2016” anticipates that the percentage of e-commerce transactions (including travel purchases) completed using debit cards will decline from 30% this year to 21% by 2016. Javelin says there are two primary reasons for the shift. First, the Durbin Amendment that went into effect this fall limits the amount the larger banks that issue most of the debit cards in use can collect in transaction fees. Debit card issuers, in turn, are changing their debit programs in ways that are likely to sway consumers away from using their debit card accounts to pay online, such as by increasing use fees and eliminating free checking, Javelin says.
Second, consumers responding to the slowly improving economy are putting away their debit cards in favor of credit cards, which Javelin says consumers view as safer than paying with debit because credit cards are not linked to a bank account. The report is based on survey data taken from a panel of more than 2,300 consumers in August and also an analysis of U.S. government data.
Consumers returning to credit cards could spell good news for e-retailers, as consumers spend more per transaction when paying with credit than debit. Javelin says consumers spend an average of $82.09 per purchase when paying with a credit card compared with $58.29 when paying with a debit card. Javelin forecasts consumers will use major credit cards for 45% of total online transactions in 2016, up from 40% today. The use of store-branded credit cards will increase from 5% today to 6% in 2016. The use of prepaid cards or gift cards will increase from 8% to 9% over the same period and the use of alternative online payment systems, like Google Checkout and PayPal, will increase from 17% to 19%. The rest of the transactions will be conducted with debit cards.
Javelin says 49% of consumers have used an alternative online payment system at least once in the last year, up from 46% in the 2010 survey. The research firm says such systems will account for $82.0 billion in payment volume in 2016. Consumers say the primary reasons they choose to use alternative payment services for e-commerce transactions are so they can buy from merchants that don’t accept credit or debit cards (43%), because the services offer greater protection from fraud or misuse of personal information (39%) and because they enable shoppers to keep their identities private (29%).
Javelin forecasts that the U.S. e-commerce market will grow 7.5% annually through 2016. It estimates that online retail and travel purchases will total $444 billion in 2016, up from $309 billion this year. The growth, Javelin says, will come from an increase in the number of online shoppers and their frequency of purchase. It forecasts that 87% of consumers will buy online in 2016, up from 74% today.