NEW JERSEY, March 17, 2009/Business Wire/- Alternative payments represent only a fraction of e-commerce total sales today but according to Javelin Strategy and Research, about 1/3 of all online retail transactions ($268 billion) are predicted to be alternative payments by 2013. The explosive growth of alternative payments can be attributed to consumer and regional preferences. As every sale counts in these economic times, it is now more critical than ever that e-merchants understand and offer payment choices based on consumer and regional preferences.
Most merchants view the alternative payment market as a limited competitive field with few real differentiators between the players. More often than not, merchants investigating alternative payments are limiting their discussion to ACH, PayPal, Amazon and Google Checkout. In fact there are a number of payment options and a rapidly growing number of service providers offering them. The Fraud Practice’s Guide to Alternate Payments identifies 8 categories of alternative payment solutions with over 100 service providers offering their services globally. The categories include credit card payments, ACH & bank payments, payment aggregators, credit-term providers, cash alternative providers, advertising/promotional providers, mobile payment providers and invoicing payment providers.
Not all alternative payment options will produce the same results, determining the right alternative payment options for your company means evaluating payment options based on regional support, consumer preference, customer base and return on investment (ROI).
Regional Support: There is no one payment option that is equally effective in all regions worldwide. Credit cards are accepted worldwide but while they have dominated the US and Western European eCommerce markets, they have not shown the same dominance in emerging markets such as Africa, South America, Asia and Eastern Europe. In these markets a merchant needs to support other payment options otherwise they will be limiting their potential customer base to only a small fraction of the overall population.
Consumer Preference: It is not enough to simply find an alternate payment method that is supported in the region you are doing business in; the payment method needs to be one that consumers in the region recognize, trust and want to use. In Germany credit cards are present and used, but they are not the preferred payment method. In Germany the preferred payment method is direct debit, Elektronisches Lastschriftverfahren.
Customer Base: The best alternative payment option has little value if the supported customer base isn’t large enough to warrant the effort to integrate and support it. Evaluating a customer base should be done on two levels, potential and current. Consider China, 93% of the 1.3 billion person population has access to direct debit while according to China Daily there were just over 100 million credit cards in circulation in China as of June 2008. In contrast there were over 596 million mobile phone subscribers as of June 2008. In terms of potential the ranking would be direct debit, mobile phones than credit cards. In terms of current use the ranking would be direct debit, credit cards than mobile phones. Mobile payments offer excellent potential in China, but it is not the current preferred choice for paying for services in China. Does this mean you should not be looking at mobile payments? Not at all, in some regions mobile payments are the dominate payment method and 3 out the 5 top five alternate payment providers are working on plans to support mobile payments.
Return on Investment (ROI): The reasons why a merchant may implement alternative payments vary from access to markets, cost reduction, easier supportability to consumer preference. In a majority of cases, merchants are able to show a favorable ROI on integrating alternative payments in a timeframe that is more tactical than strategic. This is primarily attributed to increased sales from new consumer populations, lower costs than traditional credit cards and better fraud protection.
The Fraud Practice has created the Guide to Alternate Payments to help merchants, service providers and financial institutions to make more informed decisions on which alternative payment solutions and providers they should be considering. A Guide to Alternative Payments is a prepared research document, 60 pages in length, intended for organizations looking to gain an understanding on eCommerce alternative payment options. The Guide goes beyond a general market assessment to provide information businesses need to assess solution options and service providers. The Guide also includes easy-to-understand reference tables on regional service providers (over 80 service providers), preferences and capabilities. Readers should expect to gain:
- An introduction to the types of solution options available and the service providers that offer them.
- An in-depth understanding of the market dynamics, vertical market preferences, regional preferences and reasons to implement these services.
- A discussion on emerging markets where alternative payments are flourishing
- A general introduction to the capabilities and services provided by the major players in each of the 8 solution option groups.
While the Guide is available for purchase, The Fraud Practice has added descriptions of the 8 alternate payment categories on their free public fraud library. The Fraud Library contains valuable information for merchants seeking information on fraud prevention techniques and eCommerce payments. Thousands of merchants have already turned to The Fraud Practice Fraud Library when they have sought, or needed expert advice on simple and complex Card Not Present (CNP) issues.
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