Online Payment Providers: Disrupting the Status Quo

May 25, 2006

Abstract

San Francisco, CA, USA May 25, 2006

Credit cards are the most popular means to pay for online goods and services, but alternative online payments will account for 26% of e-commerce volume by 2009.

A sea change is underway in the online payments world, with credit cards losing dominance as new payments options emerge. Credit cards accounted for over 90% of online payment volume in 2000, but will only account for a minority of e-commerce dollar volume by 2009. This shift will have significant implications for banks, merchants, and service providers supporting card-not-present risk for online merchants.

Today's online payment options (such as PIN debit, alternative credit, email, and ACH consumer push) will also offer cross-channel solutions for merchants that operate in the physical and digital world, threatening the traditional brick-and-mortar turf of card issuers. The significantly enhanced consumer and merchant value propositions associated with the next wave of online payment options are making payments strategic assets that can contribute directly to a merchant's top and bottom line growth if implemented and marketed appropriately.

"There is growing recognition among the online community that online payment alternatives to the credit and debit card can do far more than lower costs," says Dan Schatt, senior analyst in Celent's Banking group and author of the report. "They can serve as allies to merchants in their quest to convert more prospects into sales in a way that contributes positively to the customer experience and actually lowers risk. As merchants search for any edge that can increase loyalty and lower shopping cart abandonment, they will enlist new providers that can do more to increase their profitability."

In this report, Celent profiles alternative online payment companies and initiatives with the highest potential for growth and adoption. Celent also examines the alternative online payments market by providing a ranking relative to specific merchant and consumer criteria. The report also examines the positioning of specific payment providers and provides a glimpse as to how the US online payments market will evolve in the next few years.

A table of contents is available online.

 

Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is a wholly-owned subsidiary of Marsh & McLennan Companies [NYSE: MMC].

Media Contacts

North America
Michele Pace
mpace@celent.com
Tel: +1 212 345 1366

Europe (London)
Chris Williams
cwilliams@celent.com
Tel: +44 (0)782 448 3336

Asia (Tokyo)
Yumi Nagaoka
ynagaoka@celent.com
Tel.: +81 3 3500 3023

Table of Contents

San Francisco, CA, USA May 25, 2006

Executive Summary 3
The Rise And Fall Of The Online Credit Card Empire 5
The Evolving E-Commerce Landscape 8
Disruptive Contenders 12
  Email Payments 13
  NACHA Consumer Push 18
  PIN Debit 23
  Invoicing 27
Positioning The Contenders 34
Ranking The Contenders 37
Conclusions 40
Objectivity & Methodology 41

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