- The Washington Times - Sunday, July 4, 2004

NEW YORK (Dow Jones/AP) — Online retailers are trying to bring in new customers by allowing them to pay for goods with some old-fashioned methods: checks and invoicing.

Credit cards are the most popular form of payment online, but for retailers trying to tap into every demographic — including older shoppers who fear online fraud, customers who may not have enough credit for big-ticket items, or those who lack credit cards altogether — alternatives to plastic can open doors.

“We’ve seen an increased interest in [alternative payments] over the past year or two. I think it’s going to continue to grow,” said Bob Nadeau, group manager of online product development for Paymentech LP, which processes more than half of all Internet transactions and works with hundreds of thousands of retailers.

Following in the footsteps of 1-800-Flowers.com Inc. and gift site Ross-Simons, diamond retailer Odimo Inc. began offering “Bill Me Later” invoicing to customers on its Web sites diamond.com and ashford.com in June, promising no payment for 90 days on purchases of more than $250.

Under Bill Me Later, a service developed by I4 Commerce Inc., a shopper makes a purchase with instant credit rather than a credit card, receives an invoice in the mail and pays the bill over time.

Gardening-supplies retailer and wholesaler Park Seed Co. aims to offer electronic checks as a payment option to online customers in the fall. By sharing a bank-account routing number and check number with Park Seed, a customer can make a payment directly rather than using a credit card.

Park Seed is aiming at older customers with the new payment choice.

“To them, checks are just more secure,” Chief Executive Karen Jenks said.

One in five adults does not own a credit card, and one in 10 does not have a bank account, said Gwenn Bezard, senior analyst at market research firm Celent Communications.

“That might sound like a very marginal market, but as a retailer, if you are able to tap into that — even if that represents a few percentage points in sales increase — that’s worthwhile,” she said.

Celent predicts that electronic-check transactions, including those funding PayPal accounts, will total $17.9 billion by 2005, or 9 percent of electronic-commerce transactions. That would be up from $7.3 billion, or 6 percent of electronic commerce, in 2003.

Invoicing services such as Bill Me Later will be responsible for $294 million in transactions by 2005, up from $69 million in 2003, the firm forecasts.

Wal-Mart Stores Inc., the world’s largest retailer, began accepting electronic checks on its Web site last summer.

Because I4 Commerce pays merchants within 24 hours of a transaction, just as a credit card company does, retailers have little to lose by offering Bill Me Later.

“We own all the risk and responsibilities associated with the loan,” said I4 Commerce CEO Gary Marino.

The company approves and denies loans based on information from credit bureaus and from merchants, which can tag preferred customers.

Bill Me Later users default on about 4 percent of balances, low in comparison with credit cards. The Federal Deposit Insurance Corp. estimated the average credit card default rate at 5.76 percent last year.

But Celent’s Ms. Bezard cautioned that I4 Commerce’s default rate may be low because it is processing a small number of transactions with select merchants.

“Fraudsters may not be aware of the product yet,” said Ms. Bezard.

Underlying the new interest in payment options is the fear of losing a customer.

“The customer may go elsewhere. If you lose them online, they’re potentially gone forever,” said John Coskie, vice president of marketing at CommercialWare Inc.

The company sells software to manage customer interactions to clients that include Park Seed.

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