Credit cards will be forced to take a back seat over the next few years, with half of online transactions going via newer methods by 2000.
Electronic micropayment solutions such as smart cards, e-cash and e-checks will become the preferred choice of payment for the purchase of low cost goods on the Internet, according to a recent report from Jupiter Communications.
According to Jupiter, by 2000 at least half of the transactions made in what it estimates will be a $7.3 billion online market will use some form of electronic payment technology. While credit cards are expected to remain the primary payment choice for transactions greater than $10, the report predicts that 1998 will mark the emergence of a new micropayment market, with technologies like smartcards and electronic cash gaining in acceptance for goods and services priced under $10.
Credit card companies will remain unthreatened by the evolution however. According to the report Visa, Mastercard, and American Express are all adding smartcard payment systems as additional revenue streams. Growth in the use of 'wallets' as plug-ins to browsers and the use of systems such as Cybercash will also boost business for the credit card giants as nearly all of these systems are loaded with funds from credit cards.
Jupiter reckons that e-cash transactions will make up over 40 per cent of the whole online market and 50 per cent of the sub-$10 sector by the end of 2000. It also predicts that smartcards will account for 26 per cent of all transactions by that time. The average number of transactions per online household will climb from the current nine transactions per year to 120 per year by the millennium, the analysts say, as more low value goods and services become available online.
?As new kinds of plastic emerge, like smartcards, and new types of pay-per-use services are created for the Internet, consumer behaviour will change,? said Scott Smith, principal analyst on the 'Jupiter Internet Payments Report'. ?If it?s a higher priced item, like a CD or even a PC, they are likely to pay with a credit card, but if the price is low, such as for a newspaper article or game play, they will likely turn to new kinds of e-money - smartcards or electronic coins they can also use on the PC.?
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