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Credit cards likely to remain mode of payment online

Wednesday, December 15, 2010

Credit cards are most likely to remain the preferred choice for online payments at least in the next five years; however, they will lose their place to debit cards, other modes of payment, as well as prepaid and gift cards. This projection is made by Javelin Strategy & Research. As per their forecast for the year 2011, alternative modes of payment will actually double in volume in the next five years.

Most credit card majors have lost out on online market share for quite a while now but will still remain the preferred payment choice of 2015. In spite of the issuer cutbacks that are induced by recession as well as the voluntary reduction in usage by the customers the online purchases made using the major credit cards will increase (at CAGR of 10.4%). At this rate, the volumes of credit card usage will go up from $99.9 billion to $163.6 billion in the next five years. However, the credit card major`s share on purchases online will be on the decline from 44% last year to 40% now to 37% in 2015, as per Javelin`s predictions.

Debit cards are more likely to fall in second at 28%. Since younger customers have grown up with computers, they prefer debit cards instead of credit cards partly because they can keep track of expenses as well as their spending with the debit cards as it is a more natural method of payment. They can also do the other banking functions online.