The poor economy and consumers' growing aversion
to carrying large credit card balances may be why more alternative forms of
payment are being used for online purchases.
According to the February 2010
"Online Retail Payments Forecast 2010-2014" Javelin study, while e-commerce
grew 10.8 percent in 2009, shoppers are more frequently using debit cards or other
payment methods to make those purchases.
The comfort level of shopping
online has grown over the years, with 63 percent of U.S. consumers saying they buy
online, according to the study. By 2014, it is expected that the number of
online shoppers will increase to 78 percent.
"In addition, as the total
value of purchases continues to increase, consumers will often -- by necessity
-- need to continue to diversity the payment options they use. For example,
they may want to move away from credit when they reach an available credit
limit, or shift from debit card or ACH‐based options when their checking
account balance is too low," says the study.
Online purchases made via major credit cards is expected to decline
from a peak of 54.8 percent in 2008 to 39 percent by 2014. Debit cards will
comprise 26 percent of online sales by 2014.
In 2009, online payment services (i.e. PayPal or Google Checkout)
comprised 51 percent of online purchases, surpassing gift cards (41 percent),
store-branded credit cards (27 percent), prepaid cards (17 percent), online
credit services such as Bill Me Later (17 percent) and store-branded debit
cards (16 percent).
The Javelin study outlines the following factors
contributing to the decrease in online credit card spending:
An inability or reluctance to use credit cards because of the state of
the economy (48 percent of consumers say they have decreased their use of
credit cards in 2009) and a resulting shift to use of debit cards to help control
purchasing.
Continued expansion in the number and prevalence of alternative
payment options at merchant sites.
Online credit services that offer credit terms that are superior to those
offered by credit cards (11 percent of consumers who used an alternative online
payment option selected the option because it enabled them to delay payment).
Enhanced security features (among consumers who used an alternative
online payment option, 19 percent did so to avoid misuse of their payment
information, and 14 percent did so to keep their identity private).
Recommendations by a bank or other trusted provider.
Javelin reports that as a result of these
influences, alternative payment methods will account for 19 percent of total
dollar retail payments online in 2014, and credit card usage for online
shopping will drop.
The chart compares the online purchase volume and
share of credit and debit cards from 2008 to the present, with forecasted
growth or decline through 2014.
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