Consumer fears of online buying may be abated with new payment option
A COUPLE OF YEARS AGO, all but the early consumer adopters were concerned about the security of buying things on the Web. The thought went like this: If I type my credit card information into this form on this e-tailer Web site, hackers could steal it. People were more careful with their credit cards online than they ever were handing them to waiters, or reciting their card numbers to salespeople over the phone. To these consumers, the Web was a scary new medium.
Some of that fear has abated since the early days of consumer e-commerce. With more than 50 percent of American households online, more people are buying online. Analysts, including those at Gartner and Forrester, say online sales are rising at a steady rate. And women now account for more than half of the new buyers online. We're closer to a critical mass in online consumer commerce than ever before.
There is even a silver lining when it comes to consumers who are technology pessimists, according to Mary Modahl, author of Now or Never: Winning the Battle for Internet Consumers, and a vice president at Forrester Research. Technology pessimists, Modahl says, are an e-tailer's dream because once they use a site to buy something, they are more likely to be loyal to that site and buy from it again.
Even some computer-savvy folks have concerns about making purchases online: Most are leery of hackers tapping in to their transactions.
By contrast, early adopters are more fickle. They are just as willing to buy from one site as another, depending on the deal they can get or the delivery time.
But there are still quite a few straggler consumers who haven't yet made the foray into buying on the Web. Those stragglers are the focus of several vendors looking to add more security and more privacy to the online consumer buying experience.
One such vendor is eCharge. The Seattle-based payment company started out with a program in Europe that allowed consumers to charge purchases to their telephone bills.
Last month eCharge introduced a pilot of its Net Account service in the United States.
Net Account offers consumers either a revolving credit or stored-value account and relies on two security technologies to prevent against fraud: a proprietary encryption technology that is used in conjunction with digital certificates. No personal or financial information is transmitted during purchases, company representatives said. Because it's so confident in the tight security provided through these technologies, eCharge is offering a guarantee against fraud to merchants and consumers.
This could be a boon to online merchants because currently they are forced to absorb all costs of "charge-backs," or money lost if credit card fraud occurs. So far they've persuaded a handful of online merchants of this benefit, signing up MP3.com, Deviate Industries, Anycraze.com, Open Season Wild Game, and Quick Course to accept eCharge accounts. The company is targeting an additional 200 of the Internet's top e-tailers, looking to persuade them to accept Net Account.
For consumers, the Net Account service offers a couple of extra benefits in the form of subaccounts and spending limits. For example, parents could give each of their kids a subaccount with a specific dollar amount enabled each month. They can also restrict the sites where that dollar amount may be spent. And for those budget-minded consumers, eCharge can also enable spending limits so that no one accidentally sspends more than they planned to for any given month.
The caveat is that consumers can use Net Account only at merchant sites that accept it and right now there aren't that many. ECharge has a limited window of time before the e-tail holiday shopping season site lockdown in early November to persuade merchants to offer the payment option and integrate it into their sites.
But with a second round of venture funding under its belt to the tune of $50 million, eCharge executives are confident that they can wait until next year if they need to.