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Online retail payments will rise nearly 70% over the next five years, and consumer spending online with private-label credit and prepaid cards will grow much faster than will other types of payments, including general-purpose credit and debit cards, predicts a report released this month by Pleasanton, Calif.-based Javelin Strategy & Research. In its "Online Retail Payments Forecast," Javelin's researchers estimate total annual online sales to rise 67.6% by 2013, to $248 billion from $148 billion this year. Also by 2013, online payments will account for 5.8% of all retail transactions compared with 3.5% this year. Javelin revised its previous five-year estimate of online sales, reducing it by about 30% from last year's estimate of reaching $355 billion by 2012, to account for the economic slowdown and expected recession. Although credit and debit cards will continue to dominate online payments in the coming years, several once-alternative payment methods are becoming mainstream, nibbling away at traditional payment methods' market share, the research shows. According to Javelin, credit cards' cumulative annual growth rate for online sales will be 5.6% during the next five years, rising to $107 billion in 2013 from $81 billion this year. Credit cards' share of online sales will shrink to 40% from about 55% this year, Javelin says. The cumulative annual growth rate for online debit card payments will be 14.5% through 2013, rising to $80 billion from $40 billion, and debit's share will rise slightly, to 30% of online transactions from 27%. The cumulative annual growth rate for online sales conducted with prepaid cards will be 41.8% over the next five years, with total online sales with prepaid cards rising to $35 billion from $6 billion, representing a 13% share of the online payment market compared with 4% this year. The cumulative annual growth rate for online payments using e-mail services such as eBay Inc.'s PayPal will be 14.5% over the next five years, rising to $26 billion from $13 billion. The share such services will have for online sales will rise slightly, to 10% from 9%. Store-branded credit card sales also will experience a strong cumulative annual growth rate of 23.5% between now and 2013, rising to $18 billion from $6 billion and will represent 7% of all online transactions compared with 4% this year. Instant-credit payment services such as eBay's Bill Me Later will hold steady at about a 1% share of all online sales over the next five years, Javelin estimates. Javelin based its research findings on online-survey data it gathered from 1,500 consumers in April and 2,339 consumers in September.
