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E-Payments Poised for Massive Growth

E-Payments market got a abrupt boost after the recent launch of Google Checkout, said technology consulting firm Booz Allen Hamilton. In the UK, internet sales increased by 350% in the five years to 2005 and are estimated to reach GBP26bn in 2006, with shoppers spending on average GBP1,000 online.

According to Booz Allen Hamilton, online retailers could be controlling 15% of private customer transactions by 2010 equating to GBP60bn of spend.

The volume of online card payments in the UK has increased five-fold over the last five years, reaching 310 million transactions in 2005 for a total of GBP22bn and accounting for 5% of all personal card payments.

A growing number of traditional high street retailers have jumped on the internet bandwagon so as not to lose sales to their virtual competitors and for every GBP100 of sales over the Internet, GBP71 is spent on physical products, GBP26 on services and GBP2 on digitised products.

e-Payment solutions will offer a compelling proposition of easy, security and low transaction charges threatening the default payment mechanisms, such as credit cards and bank transfers – which currently make up 90% of all consumer transactions.

For the new online payment systems to gain wide acceptance by retailers they will need to have an attractive pricing policy. This will be determined by big retailers, such as Amazon, which already have a range of payment options in place.

According to Nicolas Reuttner, Booz Allen Principal, "e-payment service providers will have to get exclusive partnerships and services in place, to ensure that online retailers are not able to disintermediate them in the long term, for example by offering their own solutions, or pushing credit cards to lower their charges to meet the new market prices."

Security is a key concern with 20% of consumers in 2005 deterred from shopping online for security reasons. However, secure e-payment systems mean that consumers don't need to share credit card details with merchants. In addition to being able to buy with only one or two clicks consumers may be able also able to view a transaction history of all purchases they have made, often with live links through to retailers.

Paypal has gained more than a hundred million customers in only a few years since its launch in 1999 and handles more than USD 17 billion annually. Booz Allen predicts that Google Checkout will take even less time to establish itself as a major player. However, with enormous growth expected in this market there is likely to be room for a further one or two players.


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