In an attempt to divert online transaction volume from credit cards, alternative payments companies are promoting their capabilities as early in the shopping experience as possible, sometimes appearing prominently on a merchant's home page.
The goal, these companies say, is to teach consumers that there are alternatives to using cards, a strategy that can help them attract users who want another payment option or have been reluctant to shop online because they do not want to use cards.
And these payments companies are now trying to expand their model beyond the Internet, where traditional payment methods have a stronger foothold and they must also compete against cash and checks.
When people are browsing or shopping online, "they're also thinking of how they want to pay," said Mark Lavelle, a co-founder and executive vice president of Bill Me Later Inc., which offers instant credit to online shoppers.
An early mention of his company's service "takes questions of payment off the table," he said, and "as it turns out, it's extremely powerful."
One important retailer that will likely support this strategy is Amazon.com Inc., which said Tuesday that it would use the Bill Me Later service and that it had agreed to purchase a minority stake in the company.
Bill Me Later, of Timonium, Md., has struck deals with several other online merchants to feature its service prominently. Toys 'R' Us Inc. has displayed a large banner on its home page urging customers to use Bill Me Later; with the exception of the retailer's affinity credit card and gift card, no other payment options are featured on its Web pages until shoppers reach the checkout process.
Bill Me Later targets people who are uncomfortable using credit cards online. It provides quick credit for online purchases and sends customers a bill by standard mail or by e-mail, which they can pay later with a check or with a credit card.
Mr. Lavelle said that arranging for prominent placement on merchants' home pages is a key part of Bill Me Later's effort "to let people know that there was another way to pay up the shopping chain."
And merchants that agree to promote his service can "double or triple" the number of purchases made through Bill Me Later than if the service was offered only during the checkout process; the size of each transaction can also increase as much as threefold, Mr. Lavelle said.
Mr. Lavelle discussed the strategy Monday in New York at an alternate payments conference hosted by SourceMedia Inc. (SourceMedia publishes American Banker.)
Bill Me Later is also featured prominently on the Web sites of Ritz Interactive Inc.'s RitzCamera.com site, the electronics retailer TigerDirect.com, and Overstock.com, among others.
Another company providing an online alternative to cards, ModaSolutions Corp. of Ottawa, has also struck deals with merchants to promote its service on their home pages.
Moda offers a payment service called eBillMe that enables customers to initiate payments to merchants through their banks' online bill pay sites. It does not offer credit; merchants don't ship the products until the payments are made.
Moda is featured on the home pages of such merchants as TigerDirect and ToolKing.com.
Bruce Cundiff, a research analyst with Javelin Strategy and Research in Pleasanton, Calif., said at the conference that alternative payment services such as Bill Me Later have "been able to establish themselves as this viable alternative" to credit cards by letting customers know they have options "earlier in the shopping process."
He said that many customers are looking for new ways to pay online, either because they have concerns about security or want something that is easier to use than a payment card, and "alternatives are growing at a faster clip than traditional payment types."
"Perception is reality," he said. "If a consumer perceives a certain payment method to be more secure and/or more convenient, that's what is going to be driving their behavior."
Moda and Bill Me Later are also attempting to move into the offline world.
Bill Me Later works with several catalog merchants, some of which promote the service prominently on both their Web sites and in their printed materials rather than just listing it alongside other options on order forms.
Many of these companies do a lot of business over the phone, and Mr. Lavelle said his service works through that channel as well, though the volume is generally lower than through the Internet.
He said phone shoppers tend to have fewer security concerns about using payment cards, so Bill Me Later tries to focus on convenience as a way to reach these people.
Most of the data Bill Me Later needs to authorize credit can be culled from the shipping and contact information the buyer has already provided to the merchant; shoppers must provide only their date of birth and the last four digits of their Social Security numbers, which Mr. Lavelle said can be easier than reading out an entire credit card number.
Marwan Forzley, Moda's president and chief executive, said that most of the online merchants that offer his service also use it over the phone, and that eBillMe translates well to the offline space, in part because it does not involve credit.
Mr. Forzley said that call center operators have been trained to suggest eBillMe as an alternative when shoppers' credit cards are declined.
He said the company is developing a version of its service that can be used in stores, at the point of sale, though he said it is too early in the process to give any details.
PayPal Inc., the payments unit of eBay Inc., has also found that making the payment function very visible can drive up its use. PayPal's logo appears prominently in ads for products that can be purchased through its Text-to-Buy service, which enables people to buy products they see in print ads by sending a text message from their phones; payment is automatically routed through PayPal and the goods are shipped to the users' addresses listed with the payments service.
Amanda Pires, a spokeswoman for PayPal, said that without prominent placement in an ad, "there's no awareness that that's the way you can buy that product" using PayPal. "Unless you put that brand up there, they're not going to know that they can get it instantly through their mobile phones."
Nick Holland, a senior analyst at Aite Group LLC of Boston, agreed that alternative payment options need to be presented earlier in the shopping process. At the checkout page, "you're competing with traditional payment mechanisms" and are at a disadvantage, he said.
"If you can somehow jump the line by having some presence prior to the checkout page, it brings you front-of-mind," he said. "It's the same concept as top-of-wallet" in the credit and debit card space, he said.
