Credit, Debit, or Something New?

Alternative payment methods are hot, and getting hotter. Some 74 percent of online shoppers reported using alternative payments during recent Web shopping experiences, according to Forrester Research.

Interest in alternative payment systems shows no signs of cooling off. Alternative payments reached $37.3 billion in 2007, up 33 percent over 2006, according to a Packaged Facts report. Retailers not offering credit card alternatives are missing out on an increasing sales potential.

Consumers have compelling reasons to be attracted to alternative payment systems: They want stronger protection when shopping online and better ways to manage their money.

Alternative payment options satisfy these needs by giving shoppers more choice to determine how they will pay for online purchases. And by tapping into these consumer preferences, retailers can attract more buyers, strengthen customer relationships, and keep customers coming back for repeat purchases.

Attract customers with cash options
With the U.S. economy sputtering, and food and energy costs skyrocketing, many online shoppers are looking for more ways to pay now rather than later. A number of consumers are putting away the plastic until they can pay off debt. Online retailers can respond to consumer demand by offering cash-like alternative payment options that leverage online banking for e-commerce checkout. These options are appealing to shoppers looking to checkout without increasing debt.

They also leverage the proven security of online banking, which consumers have grown to trust and rely on. Retailers can tap into this established trust and offer an option that will bring consumers who bank online to the online checkout with a bill pay process that they are already familiar with. Making the checkout process comfortable and seamless is a key for retaining customers online.

Fraud protection leads to confident buyers
Consumers also want safer ways to shop. Indeed, the number-one factor influencing consumers' online payment choice is security, according to a recent study conducted by JupiterResearch.

The study examined shopping sentiment to uncover new ways for merchants to increase consumer confidence at checkout. Ironically, while fraud protection worries loom large, the JupiterResearch study found that 68 percent of credit card users and 65 percent of debit card users are unaware of the amount they would be liable for if their cards were lost or stolen or if they became a victim of fraud. This high level of confusion is leading to hesitation at the checkout.

Retailers can help to increase consumer confidence by bolstering checkout security, and choosing alternative payment options that offer buyer protection features. These options give merchants more opportunities to increase average order values and build customer loyalty.

Here's what to look for in a comprehensive protection plan:

• Payment protection that safeguards customers, with zero liability for unauthorized transactions. Knowing they can't be penalized for unauthorized transactions bolsters consumers' confidence while shopping; increasing the likelihood they'll spend more, and spend more often.
• Price protection that ensures consumers get the best possible price. This will keep them from shopping elsewhere due to price comparison.
• A return guarantee that lets consumers return products for a full refund, even when the retailer's official policy says all sales are final. The payment provider will foot the bill, protecting both the retailer and the consumer from risk.
• In-transit protection that covers buyers from loss, theft, or damages during shipping. The provider replaces the item, free of charge, again protecting buyers and sellers. It's especially attractive to people who usually shop offline because they're concerned about shipping damage.

A better bottom line
Offering alternative payment options gives consumers what they want: greater security, more control, and stronger protections when shopping online. Taken together, these improve the customer experience, solidify customer relationships, build loyalty, and incentivize sales.

Cash-like payments also boost retailers' margins. Transaction fees are usually 30 percent to 50 percent lower than credit and debit cards, based on merchant size and volume. And there are no service fees, no back fees, and no hidden fees.

Offering payment alternatives keeps an online merchant on the cutting edge of CRM. And that's undeniably the path to a better bottom line.

About the author
In addition to being the founder and chief executive officer of MODASolutions, Marwan Forzley is also the creator of eBillme, a payment option that enables consumers to shop online and pay directly from their online banking accounts. For more information, go to www.eBillme.com.

Please note that the Viewpoints listed in CRM magazine and appearing on destinationCRM.com represent the perspective of the authors, and not necessarily those of the magazine or its editors. If you would like to submit a Viewpoint for consideration on a topic related to customer relationship management, please email viewpoints@destinationCRM.com.

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