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The Green SheetGreen Sheet

The Green Sheet Online Edition

September 24, 2007 • Issue 07:09:02

Mercator weighs upstart payment options

With the release of Alternative Payment Services: Moving into Traditional Payment Territory, Mercator Advisory Group provides an in-depth look at how the new kids on the block are making inroads into the established payments space.

Given the dramatic rise in online purchasing, the 34-page report is a timely look into how the new systems work and the issues that accompany them.

While in-person POS transactions still account for the majority of consumer purchases, online sales have seen huge growth in recent years.

In 2000, less than 1% of sales were performed online; today that number is closer to 5%, accounting for $116 billion in sales.

However, that growth is not expected to be sustained, due in large part to customers' fears over security breaches and lack of convenience.

Annual growth of online sales are projected to slow to as low as 20% to 16% by year end 2007, and to slow even further in 2008 to around 13%.

Meet the alternatives

In response to consumer demand for improved online payment options, as well as merchants' desire to lower processing fees and staunch shopping cart abandonment, a variety of payment systems has emerged.

Each continues to evolve to provide the right payment system for customers' changing needs.

Mercator's report examines issues surrounding this emerging space, including a look at services such as PayPal, Google Checkout and Bill Me Later. Specifically, the report examines:

  • The role and adoption of these competitors of traditional payment services
  • Each of the principle providers
  • The consumer demographics that they appeal to
  • Current and future roles of alternative payment services
  • The various payment modalities
  • Drawbacks and issues of each payment service in relation to both consumer and merchant
  • The challenge of integrating multiple payment methods into an e-commerce site.

"When you add game changing providers like Bill Me Later, Google Checkout's blended ad and payments value proposition, PayPal's broadening range of pay now and pay later offers to the growing set of other payment services, online merchants now have new options and new ways to get paid," said Melanie Broad, of Mercator Advisory Group's Emerging Technologies Service and principal analyst on the report. "While competition will blur distinctions as providers enter each other's space, merchants and their customers will benefit," she added.

Amazon's recently inaugurated Flexible Payment Service, which allows for movement of money between any two entities (human or computer) and is available for use to non-Amazon Web sites, may further challenge traditional payment services. The report is available at www.mercatoradvisorygroup.com. end of article

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