Survey: Online Payment Alternatives Could Tap $14 Billion in Missed Sales

Some 74% of consumers would be willing to spend about $960 more per year on music, games, subscriptions, and other digital content online if they could use a form of payment that's safer and more convenient than a credit or debit card, a survey released Tuesday reveals. Given current estimates of active consumers online, that adds up to $14.4 billion in forgone sales annually for Internet-based content sellers, say Javelin Strategy & Research and Paymentone Corp. Javelin polled 2,038 consumers in March for PaymentOne, a processor of e-commerce transactions. Aside from those who say they'd buy more if given alternatives, some 72% of online consumers said they have abandoned a purchase when it came time to make payment. “The major finding of the poll is that the availability of secure and convenient payment options beyond traditional credit and debit cards can drive significant incremental purchases, subscriptions, and transactions,” said Bruce Cundiff, research analyst at Pleasanton, Calif.-based Javelin, in a statement. “This is an outstanding opportunity for online merchants to grow revenue through the introduction of payment alternatives.” The percentage of online consumers who would buy more if given payment alternatives dipped slightly from results found in 2005 and 2004 polls, when 77% gave this response, but is up from 61% from the 2003 poll. The latest survey shows young consumers are even more likely to use payment alternatives, with 79% of respondents aged 18-34 saying they would buy more. Income also matters, with 80% of those with incomes of $50,000 to $150,000 indicating they would press the buy button more often if given alternatives. For all respondents, payment choices mattered more in making a purchase decision than better content (a three-to-one margin) and affordable broadband service (six to one). The estimate of lost revenue is based on an estimated 42 million U.S. households shopping online in 2005. Applying 74% to this number yields 31 million, which PaymentOne boiled down to 15 million when considering user demographics and the types of products these consumers are buying. Multiplying the $960 average increment by that number yields $14.4 billion in money left on the table, according to Javelin and PaymentOne. Fears about the security of credit card data online continue unabated, the survey shows. Some 54% of respondents cut back on online shopping out of concern their privacy or information will be violated or stolen. Thirty-six percent say they fear their card information will be intercepted. On top of security concerns, the survey also showed 16% of respondents don't have a credit card. The poll was based on representative samples based on gender, age, and income. Generally, its sampling error was plus or minus 2 percentage points at the 95% confidence level. San Jose, Calif.-based PaymentOne processes e-commerce transactions by allowing consumers to charge small-value items to their phone or broadband bills.