FRAMINGHAM (02/01/2000) - About 95 percent of all online purchases were made with credit cards last year. But that could change as software developers and electronic payment services unveil a variety of new payment options.
People who make small online purchases - such as buying one song from a CD - will soon be able to have the transactions show up on their monthly Internet service or phone bills. The service, to be launched in the next quarter, is being developed by online payment firms Qpass Inc. in Seattle and Trivnet Inc. in Saratoga, Calif.
After registering, shoppers can purchase items from any Qpass merchant partner without using a credit card.
Such micropayment services are important because inexpensive purchases can cost more to process on credit cards than the purchases themselves, said Charles King, an analyst at Zona Research Inc. in Redwood City, Calif.
Micropayments are already popular in Europe, where credit cards aren't as widely accepted as in the U.S., he said.
"About 12 percent of purchases in the physical world are less than $10. There's reason to believe you can approach that figure on the Internet," said Ken Kerr, an analyst at Gartner Group Inc. in Durham, N.C.
Another payment option is being developed by eCharge Corp. in Seattle and Electronic Data Systems Corp. in Plano, Texas. The two companies are planning an untraceable "electronic cash" transfer service.
The eCharge service, slated to start later this year, will let people set up prepaid accounts similar to checking or debit-card accounts and draw upon them for online purchases. People can also open credit accounts with eCharge.
Last week, San Jose-based CyberSource Corp. added electronic-check services to its online payment options. Officials said electronic-check fees are lower than the fees for online credit-card transactions.
So, what's wrong with credit cards? Analysts said the 183 million people expected to be shopping online in 2003 will want to have a wide variety of payment options to suit their personal preferences and the type of transaction being made.
A recent study by New York-based Jupiter Communications Inc. showed that 65 percent of online shoppers would continue to use credit cards. But 13 percent said they would prefer to use electronic cash, 13 percent said they would rather have money withdrawn from a checking account and 8 percent said they preferred automated teller machines or debit cards.
"In the off-line world, people use different payment methods in different circumstances," said Jupiter analyst Robert Sterling. "As online matures, we expect to see that same sort of thing happening."