Alternative payment types PayPal, Google Checkout, and Bill Me Later

Posted on Friday, October 19, 2007 by Bryan Johnson

Mercator Advisory Group, an independent research firm in the payments industry, recently completed a study on alternative payments. This is a partial abstract of the report that I thought was very helpful in putting the online and alternative payment space in perspective with the payments industry as a whole:

While retail point of sale continues to be the largest area for consumer payments, online consumer spending has yet to reach its potential from the payment perspective. In 2000 less than 1 percent of sales were via the internet. Today, that spending is likely to be $116 billion in the United States, a full 5% of retail spending. But this annual growth is predicted to slow from 20 percent to 16 percent by year end and further to 13 percent by 2008. As these rates slow, online merchants must meet their customers "where they are" with the right payment mechanisms to maintain the highest possible growth and the widest possible sales funnel. Alternative payment systems are fast becoming an important way for merchants to sustain and accelerate that online sales flow.

This report and most others that analyze the affect of alternative payments show that by implementing additional payment types such as PayPal, Google Checkout, and Bill Me Later, in addition to traditional merchant acccounts, merchants can increase sales by lowering shopping cart abandonment rates. The study is much more extensive in the approach and analysis than what I've called out and these guys have a great reputation for quality work.