No Plastic? No Problem
Tony Rubin seems like an ideal customer for Web merchants. A 34-year-old aspiring restaurateur attending Kendall College in Evanston, Ill., he's business-minded and often cruises the Net. But he never buys a thing. "Some crazy hacker can get hold of my credit card," he says. "Nah, man. I just don't trust the Web."
A primitive mindset for the 21st century? Perhaps. After all, Net shoppers will spend $53 billion online this year, and 88% of them pay by credit card, according to New York Web researcher Cyber Dialogue Inc. No doubt, credit is the king of Internet currency today. But the continued success of e-commerce depends on further development of creative alternatives. As the Net becomes a mass medium, it attracts as many tech pessimists as propeller heads. Indeed, anxiety about security keeps millions of Web users from buying online. Cyber Dialogue says a full 54% of online adults think it's easy for their credit-card number to be swiped.
And don't forget those who can't get plastic. Many of the 17 million teens and young adults online--the Web's most avid users--don't have credit. So members of a generation as familiar with the Net as they are with bicycles and TV are often forced to pay for online orders by phone or in person. People 18-29 represent only a quarter of cybershoppers who pay for Web orders with credit cards, but they make up 36% of those who pay with cash or check, says Cyber Dialogue. The young "are the disenfranchised of the Internet," says Ginger Thomson, CEO of DoughNET Inc., which runs a teen Web site.
Several sites have rushed to fill the void. DoughNET, RocketCash, and iCanBuy.com let young people set up an online bank account to make Net purchases without credit. Parents or family members create the accounts by mailing in a check or charging a credit card. There's just one hitch: Many of these services aren't very big. ICanBuy's 350,000 users, for example, can indeed buy--but only from the site's partners.
Teens aren't the only ones hit by the Net's plastic bias. Adults without credit histories or with bad ratings are shut out too. There are ways through this barrier. Many ATM cards can be used online. And Fingerhut.com offers a credit card for cybershoppers rejected by major banks. "It's important to give access to folks who can't get credit," says Fingerhut Vice-President Rafael Saldana.
Trouble is, many consumers don't like sending financial details into the ether. That's why American Express (AXP) offers a service that generates a new card number for each Net purchase--reducing the risk that a cybercrook can tap into an account. And a system called PayCash lets users pay for Web orders at Western Union storefronts. When the site receives verification of payment, it sends the goods. "I would be totally cool with that," says the security-skittish Rubin.
True, these services can create new hassles for Web merchants. Partnerships have to be set up and payment systems tweaked. The good news is, options are growing. Hundreds of e-stores have partnered with services such as PayCash or the teen sites. Others are trying PayPal.com, which lets users zap funds from online accounts to merchants, and InternetCash.com, which offers pre-paid cards for Net purchases. Whatever the method, it's important to serve all consumers, not just those willing--or able--to slap down the ol' plastic.