Consumers Want to Pay Now for Online Purchases, Not Later

Nearly one in five dollars spent online during the holiday shopping season will be paid for using alternative payment methods, a research firm predicts.

Javelin Strategy & Researchof Pleasanton, CA, said alternatives include prepaid or gift cards, eBay’s PayPal, and eBillMe, an online banking service.

In “2008 Online Retail Payments Forecast,” the research firm said the credit crunch will prompt online shoppers to cut down on the amounts charged to their bank-issued credit cards — and turn to the alternatives. The forecast found that online consumers are likely to increase the amounts charged to store-branded credit cards.

Of $42.8 billion spent online during the holiday season, Javelin estimates that or $7.8 billion or 18 percent will be paid using alternative payment methods. By 2012, the firm figures that portion will increase to one-third of the online transaction volume.

Online payments are expected to total $148 billion or 3.5 percent of total retail sales in 2008, according to the study.

The forecast identifies several key findings:

• Multi-channel stores will benefit with store-branded or private-label credit cards due to consumers migrating purchases from in-store to online.
• Three emerging alternative payment methods — eBillme, NACHA SVP, and Moneta Value — leverage familiar consumer processes.
• With the acquisition of BillMeLater by eBay/PayPal, growth is expected for BillMeLater.
• Mobile channel growth is key for Google and wireless carriers for digital payments.

Javelin created an online payment forecast model based on primary and secondary sources of consumer and Census data. The primary data were collected from a random sample of respondents in September.