A primer on e-commerce payment strategies

CREDIT CARDS ARE NOT THE ONLY ONLINE PAYMENT OPTION. A panel at the MRC’s E-Commerce Payments & Risk Conference offered some insight into what else is out there.

For instance, there’s direct debit, in which payment is made directly from the customer’s bank account. Panelist David Gee, director of finance and administration for computer software seller Blizzard, said that direct debit has a lower cost vs. credit cards. But there is a longer time lag between purchase and payment, he added, and chargebacks can be high.

Payment aggregators, such as PayPal, act as a go-between for the customer and merchant. Payment aggregators are more expensive than some other methods, Gee said, but they can be helpful, especially with international orders.

Panelist Alan Johnson, director of payments for Overstock.com, said that when the discount general merchant added PayPal as an option, it saw an increase in business.

Credit terms services, such as Bill Me Later, extend credit to individuals to buy online. Overstock.com began including Bill Me Later about six years ago; the site has found that Bill Me Later customers have a higher average order value.

Cash alternative payments let consumers exchange cash for credit. It’s a good method for reaching “unbanked” or “underbanked” customers. But Overstock’s Johnson pointed out that the customer may not use that credit to buy online.

Alternative payment methods, such as TrialPay, offer free or discounted services through acceptance by a customer to make a purchase at another site.

Mobile payments facilitate financial transactions through the use of mobile, SMS, shared value accounts, or carrier billing. Blizzard uses the mobile option in Korea, Gee said. But when you bill to the mobile carrier, there’s a long payment cycle; “it could be 60 days before you get payment,” he said. Mobile will be a true alternative “when payment is instantaneous.”

Then there’s general invoicing — or presenting a bill for payment for an online order. Blizzard does not offer this, but Gee said that Brazil has a good system in place for it.

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