Credit cards are the most popular means to pay for online goods and services, but alternative online payments will account for 26% of e-commerce volume by 2009.

The Federal Reserve’s 2007 study on noncash payments, released December 10, 2007, revealed that electronic payments now exceed two-thirds of all noncash payments.

A sea change is underway in the online payments world, with credit cards losing dominance as new payments options emerge. Credit cards accounted for over 90% of online payment volume in 2000, but will only account for a minority of e-commerce dollar volume by 2009. This shift will have significant implications for banks, merchants, and service providers supporting card-not-present risk for online merchants.

Today’s online payment options will also offer cross-channel solutions for merchants that operate in the physical and digital world, threatening the traditional brick-and-mortar turf of card issuers. The significantly enhanced consumer and merchant value propositions associated with the next wave of online payment options are making payments strategic assets that can contribute directly to a merchant’s top and bottom line growth if implemented and marketed appropriately.

"There is growing recognition among the online community that online payment alternatives to the credit and debit card can do far more than lower costs," says Dan Schatt, senior analyst in Celent’s Banking group and author of the report. "They can serve as allies to merchants in their quest to convert more prospects into sales in a way that contributes positively to the customer experience and actually lowers risk. As merchants search for any edge that can increase loyalty and lower shopping cart abandonment, they will enlist new providers that can do more to increase their profitability."

Among its key findings, the report anticipates that innovative payment services providers will experience 55% revenue CAGR, the industry’s fastest growth. The report points to significant opportunities lying ahead for some payment services providers— such as check services providers—and downplays the prospects of others, such as micro-payment ventures. Celent predicts that the e-check’s share of e-commerce value will climb for the next 5 years.

"Some issues, like micro-payments, are currently receiving a level of attention that is out of sync with the real opportunities," comments Gwenn Bézard, a Senior Analyst at Celent and author of the report. In reference to e-check’s growing market share, Bézard adds, "The check authorization business might not be the sexiest thing on earth, but that’s one area where sound opportunities lie ahead."

“As merchants look for alternatives to credit cards and providing their customers with more payment options, e-checks will become a more popular form for paying for merchandise online”.

Online e-check acceptance is catching on with web retailers because they enjoy the added advantages of real-time check verification, decreased non-sufficient funds checks costs and not having to wait for mailed checks.