The poor economy and consumers’ growing aversion to carrying large credit card balances may be why more alternative forms of payment are being used for online purchases.
According to the February 2010 “Online Retail Payments Forecast 2010-2014” Javelin study, while e-commerce grew 10.8 percent in 2009, shoppers are more frequently using debit cards or other payment methods to make those purchases.
The comfort level of shopping online has grown over the years, with 63 percent of U.S. consumers saying they buy online, according to the study. By 2014, it is expected that the number of online shoppers will increase to 78 percent.
“In addition, as the total value of purchases continues to increase, consumers will often — by necessity — need to continue to diversity the payment options they use. For example, they may want to move away from credit when they reach an available credit limit, or shift from debit card or ACH based options when their checking account balance is too low,” says the study.
Online purchases made via major credit cards is expected to decline from a peak of 54.8 percent in 2008 to 39 percent by 2014. Debit cards will comprise 26 percent of online sales by 2014.
In 2009, online payment services (i.e. PayPal or Google Checkout) comprised 51 percent of online purchases, surpassing gift cards (41 percent), store-branded credit cards (27 percent), prepaid cards (17 percent), online credit services such as Bill Me Later (17 percent) and store-branded debit cards (16 percent).
The Javelin study outlines the following factors contributing to the decrease in online credit card spending: