Do Alternate Payment Methods Help Retailers?

moneyAlternate payment methods (APM), in eCommerce terms, are ways to complete a transaction without using the normal credit card authorization process.  For the past couple of years Rosetta has completed a quick study of a hundred leading online retailers using the big players in this space.  Paypal, BillMeLater, and Google Checkout are the ones we have measured mostly due to marketshare in the large online retailer category.  New services and startups continue to crop up, as evidenced by the buzz related to Chris Brogan’s sponsored post around the new service eBillMe.

The major play for each of these payment methods is the additional uptick in conversion – the premise that providing alternate ways to pay will reduce people from abandoning their shopping carts and more broadly appeal to those worried about giving their credit card to a website.  Our study shows that both Paypal and BillMeLater have gained retailer adoption in the last 18 months.  Google Checkout appears to have maintained ground at the same relative group.apm

The list of retailers surveyed is the same list from our recent study on Facebook.  While not scientific, it shows us some trends in the marketplace.  The major points of the APM study this round are that the growth rate is continuing among retailers, and Google Checkout is stagnating.  Two major questions have come up:

  • Why is Google Checkout not keeping pace?
  • Why are other big name retailers still sitting on the sidelines?

Google Checkout recently dropped their incentive program for AdWords customers, but retailers aren’t typically quick to respond.  BillMeLater was recently acquired by eBay from Amazon, who also owns Paypal.   I wonder if the ROI is really there, despite low cost to implement these programs.

What I am more interested in is hearing from you.  Do any of the online sites you shop at regularly offer these methods?  Do you use them, or would they influence your buying decision?  Why or why not?  Our study was picked by DM News and Storefrontbacktalk.com (thanks!) but I’d love to hear what people use and why.

Photo credit:  nicmcphee via Flickr

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  • Liz

    Adam, there was an article about this on eMarketer this week. According to these stats, BillMeLater is not used very much. http://www.emarketer.com/Article.aspx?id=1006863

    Liz

  • Liz

    Adam, there was an article about this on eMarketer this week. According to these stats, BillMeLater is not used very much. http://www.emarketer.com/Article.aspx?id=1006863

    Liz

  • Interesting post, AC – Thanks for sharing.

    At least for me, the option of having alternative payment methods is appealing – and one that I take advantage of regularly. I believe PayPal was first to market here, taking advantage of eBay popularity back in the day. I signed up for a PayPal account and continue to have a small pool of $$ in that account for such occasions.

    I find it most appealing when dealing with smaller vendors. I have no issues giving Amazon or similar brands my credit card. Sure there’s always risk to online transactions, but I have a level of comfort with established players. Not so much for the smaller shops… And often I’ll bail out of a transaction at the end if dealing with an unknown player providing only a form field for my Visa #.

    In these instances, I much prefer the PayPal route – It’s convenient – and there’s less risk. Given the relatively low cost of leveraging alternate pay channels, it seems like a solid way for smaller brands to minimize the number of abandoned transactions.

  • Interesting post, AC – Thanks for sharing.

    At least for me, the option of having alternative payment methods is appealing – and one that I take advantage of regularly. I believe PayPal was first to market here, taking advantage of eBay popularity back in the day. I signed up for a PayPal account and continue to have a small pool of $$ in that account for such occasions.

    I find it most appealing when dealing with smaller vendors. I have no issues giving Amazon or similar brands my credit card. Sure there’s always risk to online transactions, but I have a level of comfort with established players. Not so much for the smaller shops… And often I’ll bail out of a transaction at the end if dealing with an unknown player providing only a form field for my Visa #.

    In these instances, I much prefer the PayPal route – It’s convenient – and there’s less risk. Given the relatively low cost of leveraging alternate pay channels, it seems like a solid way for smaller brands to minimize the number of abandoned transactions.

  • Liz – Great reference article, thank you for pointing that one out. The Javelin study measured consumers’ preferences, while our study measures what a hundred top retailers are actually offering. BML isn’t used by consumers much, yet many retailers still feel it’s compelling to offer as an option. I wonder what types of consumers use it and if that correlates to categories or segments that retailers are looking to improve upon for conversion purposes. Clearly more to dig into in this space!

    Len – Thanks for sharing your thoughts. I agree that APMs like PayPal can add an element of trust for a small vendor. It’s also interesting that eBay now owns both PayPal and BillMeLater, and I wonder if that would impact larger retailers who compete (for share of wallet) with eBay.

  • adam

    Liz – Great reference article, thank you for pointing that one out. The Javelin study measured consumers’ preferences, while our study measures what a hundred top retailers are actually offering. BML isn’t used by consumers much, yet many retailers still feel it’s compelling to offer as an option. I wonder what types of consumers use it and if that correlates to categories or segments that retailers are looking to improve upon for conversion purposes. Clearly more to dig into in this space!

    Len – Thanks for sharing your thoughts. I agree that APMs like PayPal can add an element of trust for a small vendor. It’s also interesting that eBay now owns both PayPal and BillMeLater, and I wonder if that would impact larger retailers who compete (for share of wallet) with eBay.