Alternative payment systems has been the buzz phrase for several months—whether retailers are providing private-label credit cards with same-as-cash benefits, wireless devices for self-scanning of cards by consumers (see news item on page 81) or multiple payment options for online checkout, the goal is to make transactions easier and more secure.
Now the hot trend is for retailers to leverage the consumer’s comfort level and prolific adoption of online banking to enable direct transfer of funds from the shopper’s bank account to the merchant—essentially a virtual debit-card transaction.
The time is certainly right for this transition, according to the Consumer Bill Payment Survey, conducted in January by Harris Interactive and The Marketing Workshop on behalf of CheckFree Corp., Norcross, Ga. Survey results determined that online bill payments now exceed payments made by paper check and, among the 2,018 online respondents polled, more than 74% of U.S.-based households pay at least one bill online each month. Adoption of online bill payment has doubled in the last five years, when only 37% of respondents to a January 2002 survey reported they paid at least one monthly bill online.
As more consumers shift to paying their bills online, the demand for virtual “debit” transactions grows. Merchants that offer consumers the option of paying online directly from their personal bank accounts realize a number of benefits. For instance, shoppers who either don’t have credit cards or who prefer not to pay online with a credit card are quick to embrace electronic bank transfers.
In January, TigerDirect added the Secure-ebill payment option from MODASolutions to its e-commerce site so that shoppers could pay for purchases online from their bank accounts.
“On average, merchants that deploy this payment option see a shift of 2% to 6% of sale transactions go through the electronic service,” said Marwan Forzley, president and CEO of Ottawa, Canada-based MODASolutions, which facilitates the transactions between consumer banks and merchant banks.
“A significant number, anywhere from 30% to 60% of consumers who pay with the Secure-ebill, are new customers for the merchant,” he added.
There are also substantial savings for the retailer, with the processing fee for electronic bank transfers averaging 1% to