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The dominance of network-branded credit card payments for U.S online transactions is set to decrease as consumers embrace the greater perceived security and convenience of alternative payment methods forms, Javelin Strategy & Research says.
Alternative payments methods include e-mail payment accounts, gift cards, retailer-branded private-label cards, and instant credit services such as Bill Me Later.
Network-branded credit cards include MasterCard- and Visa-branded cards. Bill Me Later provides an ‘on-the-spot’ line of credit, which is linked to a specific online transaction.
By 2012, U.S. online transactions will be worth US$355.2 billion annually, compared to US$150.4 billion in 2007, says Javelin. Alternative payments will represent 30 percent of these transactions in 2012, up from 14 percent in 2007.
Javelin predicts that, of all the alternative payment options, e-mail payment accounts - primarily PayPal - will see the biggest growth, jumping from 5 percent of total volume in 2007 to 11 percent by 2012.
Prepaid and gift cards will grow at a compound annual growth rate (CAGR) of 42.7 percent to 9 percent of U.S. online volume in 2012, while the use of retailer-branded credit cards will grow at a CAGR of 35 percent to 7 percent of total online volume.
The growth in alternative online payment methods will be at the expense of network-branded credit cards' market share, says Javelin. Network-branded credit cards' share of online transaction volume will decrease from 60 percent in 2007 to 44 percent by 2012.
Debit cards' transaction volume will nearly triple to US$93.9 billion by 2012. However, debit cards' share of online transactions will remain steady at 26 percent of all online transaction volume, Javelin says.
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