Driving Consumers to Low Cost Payment Processing

Asaf Buchner | June 08, 2006, 02:12 PM

It’s interesting to observe how both Amazon and PayPal attempt to lower costs by driving consumers to a cheaper payment-processing alternative.

I have an Amazon Visa credit card. Every time I shop at Amazon, the first payment choice is that Amazon card on which Amazon pays low (if any) inter-change fees. When I choose another card, at the checkout page Amazon still tries to convert me to Visa Amazon by touting their accelerated rewards program. While I usually resist (I prefer not to receive a bill for that particular card), it is a tempting proposition.

PayPal tries to push the bank transfer alternative by defining it as the default option. If I change it to pay with a credit card, they show me a screen listing the benefits of paying through a bank transfer. PayPal has been doing it for a while now, so it must be working on some consumers. However, I find none of their arguments particularly appealing and I personally choose to pay with a credit card for the rewards and the no-interest credit.

PayPal: No finance charges or bills to pay
The "no-bill" argument is somewhat appealing (Jupiter clients should check out Ed’s report: The Move to Debit from Credit). However, I suspect most consumers already receive a credit card bill and do not pay finance charges. Besides, consumers can still pay with a debit card.

PayPal: You are 100% protected against unauthorized payments sent through your PayPal account
Great, but credit cards offer similar and sometimes better protection than PayPal.

PayPal: We keep your bank account details private
Good to know, but this is a re-assurance rather than an incentive to use a bank transfer.