Posts by Ed Kountz from May 09, 2008

Ed Kountz | May 09, 2008, 10:31 AM
Alternative Payments Update : Consumer Drivers in a Multi-Sided Market // U.K.’s Carphone Warehouse Goes Mobile (Payments)

Clients and prospects will likely already know my views on the space of alternative online payments (PayPal, BillMeLater, Google Checkout and eBillMe, in particular).

For those who don’t, here’s a quick synopsis:

While credit cards remain the number-one online consumer payment option for purchasing goods and services, this is not necessarily a function of having been designed for web usage.

Put simply, credit cards weren’t designed for the web. But their ubiquity in the U.S marketplace….and the leading role the U.S. played in the early days of e-commerce…has made cards (debit as well as credit) the natural way to facilitate online transactions. JupiterResearch survey data reflect this.

Since then, of course, a variety of other payment options designed for Internet usage have emerged. Some, like PayPal, BillMeLater, Google Checkout and eBillMe, have been relatively successful. Others, like Beenz and Flooz, have come and gone. The difficulty of balancing development of a multi-sided market—in which success is predicated on overcoming the “chicken and egg” nature of generating enough consumer demand, while ensuring adequate merchant acceptance—can be significant, and requires resources adequate to sustaining visibility, and generating demand. Not a path for the faint of heart, or weak-of-capitalization.

A new JupiterResearch report indicates that consumers who are turning to alternative online payments are doing so for two primary reasons. The first is security -- in the form of not having to enter card information online. The second, convenience, is related—as anyone who has ever wanted to make a purchase on a PC upstairs, using a credit card located in a wallet or purse a floor or two away has found. In a time-challenged society, speed of throughput takes on many forms. True, consumers report wanting the ability to still use cards, when they want to, reflecting the value of consumer payment choice. But while it takes time to expand new market offerings, JupiterResearch believes that the significant expansion in merchant acceptance over the last 18 months … and the consumer factors outlined above … bode well for the continued off-eBay expansion of PayPal, and the continued consumer adoption of BillMeLater and other services which can deliver on consumers’ needs by tapping into the speed, convenience and security aspects associated therewith.

link

Beyond online, another area in which managing the development of a multi-sided payments market will present challenges is in mobile payments. An interesting deal to note out of the U.K. this week on the subject. Monitise plc and Metavante, with whom Monitise plc is co-backer on their U.S. JV, Monitise Americas, announced the introduction of a mobile payments service tied to a prepaid payments card tied to, and distributed via, Carphone Warehouse.

Despite the name…a relic of the days when mobile phones weighed ten pounds and sat in the “boots” of vehicles…Carphone Warehouse is one of the U.K.’s largest mobile phone and phone accessory chains, making the inclusion of a Carphone Warehouse an interesting synergy in a prepaid-centric nation. In the U.K., Monitise plc operates the Monilink mobile banking and payments network, which is available to customers of HSBC, first direct, Royal Bank of Scotland, NatWest, Alliance & Leicester and Ulster Bank, plus the major UK network operators.