Live from the MRC Conference: A Primer on E-commerce Payment Strategies

Mar 18, 2010 7:12 PM  By

Las Vegas—You already know that credit cards aren’t the only online payment option. But do you know about everything that’s available in the marketplace today? A panel at the Merchant Risk Council’ s E-Commerce Payments & Risk Conference on March 17 helped attendees sort it all out.

For instance, what’s the advantage to using 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 his company does a lot of business in Germany, and direct debit is by far the dominant payment method in that country.

Gee said direct debit has a lower cost vs. credit cards. But there is a longer time lag between purchase and payment. What’s more, he said, “chargebacks are very high in Germany for Blizzard.”

Payment aggregators, such as PayPal, act as a go-between the customer and merchant. Blizzard find this option especially helpful with international orders, Gee said, because it then doesn’t have to deal with the specific requirements of each country. Payment aggregators are more expensive than some other methods, he added, but the benefits are worth it.

Panelist Alan Johnson, director of payments for Overstock.com, said that the discount general merchant added PayPal as an option because customers wanted it. As soon as it did, Overstock saw an increase in business, he said.

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. In general, he said. “We’ve seen a decent amount of lift” from offering the service.

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.

Advertising alternative payment methods, such as TrialPay, will offer free or highly discounted services through acceptance by a customer to make a purchase at another site. This may enable you to land a sale that you previously couldn’t, but Johnson said that Overstock has not used it because it’s concerned about controlling the customer experience.

Mobile payments facilitate financial transactions through the use of mobile, SMS, shared value accounts, carrier billing. The U.S. is way behind the rest of the world—especially Asia—when it comes to accepting mobile payments, Gee said.

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,” he said.

And finally, 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. That’s important, because “you need regional or customer support to offer it,” he said.

Indeed, the right payment mix requires regional support, said panel moderator David Montague, founder/president of The Fraud Practice, “since not all work globally.” You have to balance your capability to offer a payment method with your customers’ desire to use it, he said.