Saturday, April 18, 2009

Alternative Payment Defined

So what is an alternative payment? Do e-wallets qualify? There are various projections out there that say "alternative payments" will represent n% of all ecommerce payments by "n" date by such well respected research firms such as Javelin Strategy. Unless we define the term, these projections can easily be mis-understood and overstate the actual change underway. Some seem to believe that any payment where the consumer does not directly enter their credit/debit card number into the check-out form qualifies as an "alternative payment". In my opinion, Google Checkout, for example, is not an alternative payment. PayPal transactions that are funded by a Credit Card are not an "alternative payment". BillMeLater and eBillMe are clearly alternative payment. Taking Google Checkout and Credit/Debit card funded PayPal transactions out of the projections would reduce them dramatically.
What do you think?


John B. Frank said...

eCommerce IS an alternative to Brick and Mortar. The difference between a traditional retail transaction and transaction conducted on the Internet is simply this: It is a "card not present" transaction, which also means that the magnetic stripe Track 2 data is NOT captured. So in that sense, it IS an "alternative" payment, when compared to the "conventional" manner it is done a retail location.

For example: There are "two" players in the PIN Debit for the Internet game.

One, HomeATM, engineered and manufactures the world's first and only PIN Entry Device, designed solely for eCom use, to be PCI 2.0 Certified. The consumer literally swipes their card into the device, which plugs into a USB port and enters their PIN. The end result is a 100% secure transaction which carries significantly lower interchange fees.

The other, Acculynk, designed a "floating PIN Pad" which, in effect, is simply a "pop up" PIN Pad whereby consumers enter their PIN's into a Graphical User Interface.

The first is "conventional"...the second is "alternative."

To read or learn more, visit

SKlebe said...

John, thanks for your comment. You reinforced my point about the lack of a viable definition. My frame of reference is purely in the context of ecommerce and those offerings that are already meaningfully in play. I do agree with you that if Acculynk or HomeATM ever get any traction, they would clearly fall into the category of legitimate ecommerce alternative payment methods.

DThomas said...

Great question Steve. To me, Alternative Payments are those that do not strictly adhere to the issuer-network-acquirer payments model that we have all come to know and love. (In fact, an equally interesting question would have beed to first define what a "Traditional Payment" is! If we knew that, then an alternative payment would be everything that fell outside that definition.)

While I admit I don't have an iron-clad definition to offer, maybe I can contribute to the thinking by putting a stake in the ground: I believe that payment methods that do not adhere to the issuer-network-acquirer model are those that do not utilize the card association networks or the EFT networks, or those where the liability of payment is held by a player that is different than in the model (i.e., not the FI).

To my way of thinking, Acculynk is thus *not* an alternative payment, it simply uses a different means of capturing PINs while keeping the traditional payments model intact. Same thing goes for HomeATM. My point is that its the model that makes it alternative or not... not the device. BTW, I don't want to take anything away from those companies for the creative and innovative way they have gone about solving a much-needed problem for how to provide consumers with PIN Debit over the Web, I just don't think they are "alternative payment" types.

SKlebe said...

D, thanks for your feedback. While I do not agree with some of your conclusions, the relevent point here is that the various research firms seem to be using the definition that an alternative payment is any payment that does not involve the consumer directly typing their credit card number into the check out page. Hence, we have a lot of conclusions being drawn about the market for alternative payments that are false.

digital signatures sharepoint said...

Hi Steve Klebe, I am more than happy to know something more about the alternative payment method. I am visiting your blog from last 2-3 weeks and always able to learn something new and useful. Thanks a ton.