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New payment methods – Will they fly?

January 10, 2009

In the early days of ecommerce, taking and receiving payments was a complex business and a delicate balancing act between security and reliability. Roll forward to 2009 and online payments are pretty straight-forward, with greater choice and tighter controls to protect both consumers and merchants. However, greater choice presents different dilemmas.

So what does the landscape look like? What are the options available to online merchants?

Without question it’s a crowded market, however credit and debit cards remain the dominant payment method. Then there are the specialist ecommerce gateways; the most popular being Paypal and Google Checkout. Next there are the new kids on the block; offline payments (buy online, pay in a shop), pre-pay cards, even the social networks are getting in on the act with the much anticipated Facebook payments due to launch next year.

Pre-pay

With traditional card payments dominating, but with credit harder to obtain, one area likely to grow is the pre-pay card, a PAYG scheme similar to mobile phones. The good news for the merchant is that pre-pay cards are no different from accepting standard debit and credit cards.

Paypal

The payment method that should be added by all online stores is Paypal. There’s a lot of confusion around Paypal as it can also allow a small merchant to accept payment by card. The rule is simple. When you get started and don’t have “merchant status” with a bank, use Paypal to accept both payment cards and payments from Paypal accounts. After obtaining merchant status, use a service like Actinic Payments or Worldpay to accept payments on cards, because it’s cheaper. But continue to accept payments from Paypal accounts, as this can boost order volumes by up to 10%.

The mobile as a payment device

The ethos “less is more” is something the mobile industry has embraced with some gusto. Already one mobile can double up as a camera, music player, phone and games device. What’s next, your wallet?

The idea is simple, your phone is connected to your bank and credit card. Then when you go shopping your phone uses contactless technology to pay for goods. This may sound futuristic, however the future is already here. Pay-by-mobile schemes are already well established in Japan, and a trial is taking place in the UK. Quite amazingly for a new technology, a single framework has already been agreed, the next step is surely world-wide roll out.

The other advantage of mobiles is that they are network-connected physical devices with intelligence built in. They are theoretically the perfect platform for developing robust anti-fraud payment over the internet.

Close to home

It’s hard to tell which payment methods will triumph, but my vote goes to what we already know. So I think that we will see the growth of top-up cards alongside debit and credit card payment. Mobile Pay is exciting, and while we may see some progress replacing Oyster cards and the like, it’s likely to be some time before we see it fully embraced online.

One Comment
  1. I think you’re right to highlight mobile phones as key for the future in payments.

    Mobile phones are ubiqitous personal devices that are rarely far from their owner, have several levels of unique identifiers, and can readily transmit and receive confirmation and verification data.

    I thik there’s also scope for QR-codes and E-ticketing for events to act as stimulants to make Mobile Payments more widely used and trusted.

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