Will New Offers From Payment Providers Spark Holiday Sales

Pfreemanevans | December 04, 2006, 09:42 PM

Written by special guest blogger: Ed Kountz

How can online merchants and consumers enhance their 2006 holiday shopping? If leading online alternate payment services are successful, one way will be a payment method for online purchases.

Alternate online payment services are aggressively positioning themselves this holiday season, pitching no-fee transactions through year’s end for qualifying merchants whose customers choose those payment options. In addition, early evidence shows healthy rates of holiday usage for alternate payment services, including PayPal, Google Checkout, BillMeLater and Secure e-Bill.

Consumer adoption of online alternate payment services has traditionally been relatively modest. Even PayPal ranked as consumers’ number-four preference for making online payments, according to 2006 JupiterResearch survey data. Yet in the weeks leading up to Thanksgiving, PayPal, Google Checkout and Secure e-Bill all announced incentives for merchants and/ or consumers who used their payment services for holiday shopping.

PayPal is offering cash rebates of up to $20 when purchasing via PayPal Express Checkout on qualifying merchant sites from Nov. 23 2006 through May 15 2007. “Qualifying merchants” must support PayPal’s Express Checkout, and are eligible for free marketing promotion on PayPal’s holiday site. Google announced that it would offer merchants fee-free transaction processing on transactions initiated using Google Checkout, Google’s streamlined checkout alternative, between Nov. 8th and December 31, 2006. Google merchants are passing these incentives on to consumers: Buy.com is offering customers $10 off a $30 purchase for using Google Checkout. Online cardless deferred billing provider Secure e-Bill, has upped the ante. Secure e-Bill is offering free transaction processing for accepting merchants between November 10, 2006 and February 28, 2007, plus a $25 consumer rebate for Secure e-Bill purchases.

The risk, short-term, is that revenues will suffer for increasing “try me” market share. To be worthwhile, that “try me” market share must transform into repeat customer relationships, bolstered merchant acceptance, and enhanced merchant site visibility. As a recent JupiterResearch report on online cardless deferred billing found, early evidence appears to be positive. And e-commerce solutions provider GSI Commerce recently reported that PayPal, Google Checkout and BillMeLater drove 18 percent of online sales for the 60% of its merchant partners supporting online alternate payments between Friday Nov. 24th and Monday Nov 27 2006. While the jury will be out on these efforts until the final 2006 holiday season numbers are in, the next few weeks are worth watching.