Alternative Payment Methods

Other ways of taking payment online include person-to-person, mobile commerce, pre-paid cash card and micro-billing payment solutions. There are other ways of taking payments online which can allow payments from customers without credit cards.

These payment services can stand alone in certain cases but mostly exist alongside a proper solution to give customers extra choice.

Although less well established, they can offer substantial benefits to the customer. They may be worth considering if the other bureaus or PSP's are not an option - risk is assessed differently by these services due to their added security or reduced susceptibility to credit card fraud.

Person-to-Person:

Consumers set up an account using their bank account details and the person-to-person solution will then allow eligible merchants to debit this account directly when you make a purchase. This form of payment is common on auction sites but can be used as a general entry-level payment solution.

These methods rely on individuals setting up effectively what is an online mini bank account. This can be charged using either credit, debit or direct bank transfer with appropriate associated costs. Once this money is in the individuals’ account it can be used for several purposes:

Paying other individuals – via their own account (must be the same P2P service) – commonly used on sites such as E-Bay Paying online retailers – via a business account. For either method, funds can be withdrawn at the other end of the transaction back to a regular bank account.

Advantages

Free to set up apart from a nominal and variable charge (for example 32p) that is levied to check that that individual is the owner of a particular bank account or credit card.
Charges are relatively low 99p - 2.9% per transaction
Fixed low costs for withdrawals to external bank accounts
Micro businesses can dip their toe in the water of e-commerce for almost nil outlay

Disadvantages

An account has to be set up with the provider, this can be lengthy and awkward
The account has to be charged manually to make a transaction. This makes purchasing an item a two-transaction process
This is a “clunky” method for any but the smallest retailers or micro businesses

Mobile Commerce:

Allows a sale that has been conducted over the internet to be confirmed by sending an SMS to the customers mobile phone.

The customer will normally need to set-up an account to do this but once they receive the SMS they can then accept or decline the sale that will (on acceptance) be charged to their bank account or mobile phone bill. There is also a growing market in ‘drop-charges’ to mobile phones where the call cost is charged at a premium to recover transaction costs.

Mobile commerce was seen to be the future of payment systems when 3G mobile technology licenses were granted a couple of years ago. Since then mobile phone companies have slowed down the pace of their technological development as they have struggled with the debt of paying for the licenses. This promising market has been rather slow to develop and there are still limited options. Despite the success of Paybox in mainland Europe, notably France and Germany, the company backed by the Deutsche bank provisionally withdrew from the UK market on 24th January 2003.

Current mobile methods involve an initial online shop experience followed by the option to pay using the mobile payment method. This involves a one-time registration process where bank or card details are stored together with delivery details. Once an account is set up purchase can be very speedy via an authentication by text message or phone call.

Pre-paid Cash Card:

These cards can be ‘charged’ by the consumer using cash, credit / debit cards or direct debit from a bank account and then used at participating websites and high street stores. Commonly used when an e-cash environment is required for children without credit-cards but also useful for small transaction amounts (even down to a few pence) where the minimum credit card transaction charges would disproportionately affect the profit in the sale.

Micro-billing:

Many micro-billing type payment solutions offer a premium telephone number billing service that is essentially pay per view internet content hosted in a private area of the web. Customers pay for this content via their Internet Service Provider (ISP) or their phone bill. Charges are typically high for this service and it is really only suitable for niche content areas.