Buy Now, Pay Later

Retailers may pride themselves on being “multichannel,” but not, alas, when it comes to online payment options. Thus far in cyber space, there has been only one way to buy anything: Whip out a credit card. But alternative payment methods are just beginning to transform the world of online retailing, offering shoppers more flexibility and helping to curtail fraud.

Bill Me Later, a system from I4 Commerce, leads the pack of alternative payment options. Instead of entering a credit card number at the point of sale, the customer receives a bill that typically must be paid within 25 days. This gives the customer more convenience and purchasing power — and greater security. For the merchant, the costs for using this service are far lower than credit card processing fees. The system’s other advantages include its capacity to use existing infrastructure, a short six- to eight-week installation time, same-day settlement, partnerships with the largest payment processors, and low chargeback and fraud rates.

“Online credit card fraud costs us $1 million a year, and it’s rising faster than our sales,” says Scott Stachowiak, director of business planning at Continental Airlines, which recently began offering the Bill Me Later option. “Credit cards present logistical difficulties. Bill Me Later has a much bigger database, and in case of fraud, they assume the risk.” In addition to lowering transaction costs, the Bill Me Later method is perfect for special sales and promotions, Stachowiak says. “We dig this opportunity to market to our customers.”

Jon Nordmark, CEO of eBags, which has been using Bill Me Later for over a year, raves about it. “It has been more of a revenue lift than our two largest partners,” he says. Bill Me Later now accounts for 4% to 7% of eBags’ sales, or about $2.5 million a year, and Nordmark expects that amount to triple in 2004, to $7.6 million. The system has sparked 14% of new customer growth. “Fifty percent of these shoppers would not have purchased with a credit card,” Nordmark says.

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