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Talking about alternatives, it’s worth noting that new cash-replacement pre-paid services (such as the Money Pak), e-billing services and other new entrants continue to add to the possibilities in the world of “alternative” online payment options. These ranks are led by PayPal. In less than a decade it has taken nearly a quarter of the U.S. online payments market (it handled more than $12 billion in payments in the last quarter). While the majority of its processing volume still comes from eBay, non-eBay payments are already 45% of the total and still growing.
Taken together, theese alternatives are nearly a third of online market and the powerful combination of consumer fears about security and consumer laziness are driving them. As everyone’s favourite case study, PayPal, demonstrates perfectly. Consumers know that if I they see the PayPal option on a payment page, it means that they have only to enter a password and hit OK and then they’re done. No name and address, no going in to the other room to get a card from their wallet, no expiry date or CVV or the rest of it. This is why I use PayPal whenever I see it offered: because I am lazy, and therefor entirely representative of the mainstream consumer base.
I’m not altogether sure whether “alternative” has any real meaning in this context any more. In a couple of years, credit cards will be lucky to get half of a market that they started off with 98% of a decade ago. Broadly speaking, since those heady days when they saw off DigiCash and VisaCash and Cybercoins and goodness knows what else, there has been essentially no innovation whatsoever from the credit card world. Those of us old enough to remember the dead-end of Secure Electronic Transactions (SET) might have thought at the time that some other new initiative would come along and pick up the baton (adding smart card readers to PCs, that sort of thing) but that never materialised. The “band aid” of 3D secure hasn’t transformed the space as the scheme perhaps would have hoped. As is generally the case, I think, organisations have a tendency to label fiddling around at the margins of core business as “innovation” and get on with it. This serves tolerably well as a strategy, up until the moment the core business goes away. When the alternatives have more than half of the market, I suppose we’ll have to start labeling credit cards as “alternative” instead.
These opinions are my own (I think) and presented solely in my capacity as an interested member of the general public [posted with ecto]
I am not sure that will happen so dramatically in the UK. The benefit of using Credit cards is seriously underpinned by the Consumer Credit Act (recently enhanced by the Lord’s ruling on Section 75)and I for one am prepared to put up with the hassle, (at least for the time being!).
Chris, good point, but it’s only a few of us that understand such benefits. Credit card use is in slow decline (it peaked in 2004 in UK) and the masses prefer debit cards – more than twice as many purchases were on debit card in 2006, and rising.
Yes, credit cards are truly alternative!
Thanks for sharing this post. Really helpful and informative…
Your comments are very insightful and appreciated. I agree with a previous reply that more consumers today are using debit transactions over credit. Whether this will have an impact on what Paymentech is doing, only time will tell.
Is an e-wallet really an alternative payment? Is alternative payment defined by anything that isn’t a Visa/MC/AMEX/Discover payment? How much of PayPal’s volume is funded by credit/debit card? By the way, having been the 3rd employee at CyberCash, all I can say is it was lucky that we had something other than CyberCoin in the portfolio. Oh boy, the stories that I could tell you about the internal debates over that one!! p.s. I got out before the real slide began!
Hi Steve,
I think it would be interesting to do a piece on the story of Cybercash. I’m very keen to learn from the past! Can you e-mail me, thanks.
It’s important to establish a useful model of the structure of the industry; without this model, analysis and prediction is at sea.
With this in mind, there is one particular myth that needs to be explained: The notion that banks can innovate is a controversial claim. I’ve never seen it, can you cite some examples?
IMHO, most so-called “banking innovations” were simply business models that were taken from another industry, and were most often forced on them by threat of new entrants. E.g., telephone banking came from telephone insurance, if I recall the story correctly. E.g., 2, digital-cash-versus-SET story can be explained by the simple theory of threats-from-new-entrants.
This is not to deprecate, but to understand. Banks make a lot of money by refusing to innovate. If I was a bank, I would not be able to think of a better way to make money than to suppress innovation wherever it is found.
In my opinion, due to continuous innovation in providing the most comfortable online system of receiving and paying of cash, aside from credit cards there is also now evolving and performing internet money transfer. This new method is a good choice and alternative for us because of the advantages it has. We can use it in paying item/s in part or in full. It is now being introduced by banks and non-banks financial institutions and used by most people nationwide and worldwide.
There are issues about online lending activity of No Fax Payday Loans in this site: http://personalmoneystore.com/moneyblog/
Could this kind of services also a good choice for us? What do you think?
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