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Online Paypers: The Industry Takes A Stand
Vol. 3 Issue 4, 25 Feb 2010 Ed. of Online Paypers
What do players in the payments industry say about alternative payment systems? This week, The Paypers has sat down with Brian Crozier, the VP of Business Development at UseMyBank and Kolja Reiss, Managing Director of mopay, Inc.
UseMyBank is a Canada-based online banking payments network. The company works with resellers who service vertical markets such as retail, airlines, subscriptions, travel, gaming and dating.
The Paypers: In your opinion, which are the main factors that influence consumer adoption and the use of various payment methods for online processing? As economic factors change consumer preferences and new online payment options are constantly introduced, how do you envisage the future of online credit card-based payment methods?
Brian Crozier: Consumers want the same choices to pay online as they have at retail. The online retailers that offer more choices over and above credit cards are going to have higher sales and a competitive advantage. The credit card industry has done a great job of creating rewards programs to encourage spending with their brands and will continue to be innovative. The available credit on cards has been reduced by as much as 50% which has caused consumers to spend with debit. I believe the electronic payments industry will have record growth over the next decade with debit to continue to grow faster than credit payments. Online merchants are always looking to lower their payment processing costs. I think that accepting payments from consumers with online banking will be over 50% of all online payments in the near future.
The Paypers: An increased security level is one of the fundamentals driving the growth in the number of payments made online. In other regions, especially in the US, less costly alternative (non-credit card) payment methods such as PayPal, Google Checkout and Bill Me Later are gaining significant market share previously enjoyed by players in the credit card space. In this context, what credit card industry changes should be proposed, if any? And what advantages does a credit card -based online payment service bring to buyers and /or merchants, as compared to an alternative method?
Brian Crozier: PayPal is one of the largest credit card processors in the world. They appear as an alternative but most of their customers are funding that wallet with a credit card. PayPal has to pay Visa and MC a discount rate and mark that up to retail it for 2.9% plus. Google is another company that is storing your credit card info to make it easy to checkout. Both companies are major credit card processors. Bill Me Later was bought by PayPal and grants instant credit and has higher charge off rates.
Visa and MasterCard offer consumers a lot of protection when they pay for goods and services at the expense of the merchant. The credit card industry made the retail industry what it is today and will continue to be a major force. Merchants are the ones that pay discount rates, rewards, chargebacks and fraud. This is their incentive to find lower cost ways to process their payments and how companies such as ours gets started.
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