Payment Method Breakdown for Digital Commerce

Tuesday, May 18th, 2010 at 9:42 am

Many of the questions we get asked about online billing are focused on how prevalent certain payment methods are and which ones our merchants should offer for their customers.

As our CEO discussed in his last webinar (Innovation in Business Models), the overall breakdown for payments by type across all ecommerce is summarized in the chart below with information from Javelin Research.

The 29% labeled “other” consists of everything from bank transfers (ACH / ECP), PayPal, mobile SMS billing and additional alternative payment methods such as BillMeLater. As this breakdown is measured across all ecommerce, the results are skewed towards internet retailers such as Amazon.com, Ticketmaster and airlines. For digital commerce (merchants only offering digital goods and services and driving revenue with subscriptions, virtual goods or virtual currencies), the results are even more biased towards payment cards. Also, the mix of alternative payments will be different with the most common ones being prepaid cards, PayPal, and SMS billing.

However, not all payment card brands are created equal – while we were digging through the mountains of data handled by CashBox recently, we found a nice high-level summary for the breakdown of the payment cards brands (credit & debit) that passed through our systems last year.

  • Visa: 63%
  • MasterCard: 26%
  • American Express: 9%
  • Discover: 2%

Or, to put it graphically:

As you can see, the overwhelming majority belongs to Visa, with Mastercard making up just over a quarter of card-based transactions. The other card brands (Carte Bleu, JCB, Diner’s) make up a negligible percent of transactions. Admittedly, this is skewed towards the US, as over 2/3 of our merchant’s customers pay in US Dollars. Combining this with the ecommerce statistic, this means that Visa is responsible for almost 45% of all transactions on the internet.

As always, your mileage may vary with customer demographic and product uniqueness, but the key takeaway for merchants should be to focus on the big 2 or 3 brands and think about reducing the number of payment card choices on your buy page.

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Jeremy NusserTags: , , , , ,
Posted by Jeremy Nusser in Data Geek, Marketing Fury, Payments 101.201.301 | No Comments »

Content Provider Rising

Tuesday, May 11th, 2010 at 6:28 pm

The news about Boxee using Vindicia CashBox for their new Payment Platform is about more than just a new client.  As we’ve written about here and here, we are in the midst of a revolution in how people consume online content.  This dynamic is upending digital distribution.  No longer are consumers restricted to experiencing content via specific channels.  Consume that subscription on my laptop on the train.  Check.  Sit in my family room and watch that same subscription on TV via the Boxee Box while eating popcorn.  Check.  As Gene wrote, Netflix knows he has one login across the different channels he uses to consume its content.

For content providers, the ability to deliver that compelling experience while managing the value of that offering across different channels is paramount.  That’s where Vindicia comes in.  The flexibility to define business models, from pay-per-view to subscriptions, and change them on the fly should be the prerogative of the content provider, not of any aggregator.  The primary value of the aggregator comes in helping the consumer choose across different content elements, not simply as a price setter or as a pipe.

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Sanjay SarathyTags: , , ,
Posted by Sanjay Sarathy in Marketing Fury, Vindicia Press Release | No Comments »

Chaos in the Payments Biz

Thursday, May 6th, 2010 at 9:38 pm

Just when you thought it was safe to go outside, yet another new payment method arrives on the scene. I follow at least a dozen different news sources and being in the payments biz for 30 years I get a lot of whispers sent my way too. I would strongly suggest that you seriously consider the consequences of leaping at every new payment method with the hope it is going to be the “killer app”. There is a point of diminishing returns in terms of upside. Offering more than 3-4 types of payment or multiple brands of the same basic scheme will lead to confusion at check-out. And, your customer service department with thank you!

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Steve KlebeTags:
Posted by Steve Klebe in Payments 101.201.301 | No Comments »

Dangers of Half-Sourcing Your Billing System

Monday, May 3rd, 2010 at 1:35 pm

Accepting payments online is complicated, especially for companies selling digital goods and services. Because of the complicated nature, it seems like every day there is a new startup that is trying to revolutionize the industry with a new payment method, or billing solution to make accepting traditional payments less complex. Because of this, we are talking to more and more companies that are confused or that have been burned by choosing the wrong billing system.

Background

Let’s talk a little about what it takes to process payments online. The graphic below shows the major components necessary for a company to manage their customer’s billing plans, allow them access to the service, store their payment information and bill them on a regular basis through subscriptions or one-time purchases.

Digital Payments Landscape

Read the rest of this entry »

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Jeremy NusserTags: , , , ,
Posted by Jeremy Nusser in Best Practices, Data Geek, Marketing Fury, Payments 101.201.301 | 1 Comment »

Eliminate PCI Compliance With Hosted Order Automation

Tuesday, April 20th, 2010 at 8:18 am

An article in Internet Retailer Magazine discusses the cost burden Payment Card Industry (PCI) regulations place on merchants of various sizes.  Mind-bogglingly, the effort to maintain compliance and pass the annual audit can easily reach $1 million.  To help merchants eliminate this burden altogether, we at Vindicia announced today a new capability in CashBox called Hosted Order Automation (HOA), whereby merchants can completely offload their PCI cost to Vindicia.

Before explaining how HOA works, we’ll briefly describe the background. In a typical online CashBox transaction that’s paid by credit card, a customer who clicks the Buy or Checkout button on a merchant’s site sends his or her credit-card information–securely–to Vindicia for billing.  During that process is a moment in time when the transaction passes through the merchant’s server.  Even if the merchant immediately deletes that credit-card information, the very fact that it touched the merchant’s server requires that the merchant comply with PCI.  That’s true even if the merchant is working with a PCI Level 1 Service Provider in Vindicia.

With HOA, PCI regulations do not apply to merchants who use CashBox because, instead of passing through the merchants’ servers, all credit-card transactions go directly to CashBox.  Not only can those merchants continue to enjoy the other inherent capabilities of CashBox, they still retain control of their customer experience, that is, the look and feel and other user-interface components of the checkout page. Yes, having one’s cake and eating it, too, is actually possible in this situation.

To learn the details about HOA, read its data sheet. Feel free to contact Vindicia for more information or post questions to our community forum.

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Posted by Sanjay Sarathy in Best Practices, Marketing Fury | No Comments »
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