More changes are coming in online payment processing. as more payment alternatives slowly gain traction, with more (can you say HomeATM?) on the way. Soon, online retailers will have another payment-processing option as a big processor plans to split into two.
That company is Chase Paymentech Solutions LLC, which claims to process two out of three e-commerce purchases made by U.S. consumers.
Chase Paymentech Solutions is a 12-year-old joint venture now owned by First Data Corp., the biggest U.S. payment card processor, and J.P. Morgan Chase & Company, one of the country’s biggest banks and card issuers.
That company is Chase Paymentech Solutions LLC, which claims to process two out of three e-commerce purchases made by U.S. consumers.
Chase Paymentech Solutions is a 12-year-old joint venture now owned by First Data Corp., the biggest U.S. payment card processor, and J.P. Morgan Chase & Company, one of the country’s biggest banks and card issuers.
After private equity firm KKR (which yesterday announced it is going public) bought First Data, Chase had the option of busting up the joint venture, and announced in May it would do just that.
What it means for the many online retailers that use Chase Paymentech as a processor—including Walmart.com, Zappos.com, Overstock.com and Buy.com—is that the company will split nearly in two, with Chase taking the Chase Paymentech name, 51% of the assets, the Dallas headquarters and most of the employees. Importantly for e-retailers, Chase will retain the Salem, N.H., processing facility that specializes in handling online and catalog transactions.
However, First Data will get a copy of the Salem technology and is expected to launch its own e-commerce processing operation.
Once First Data gets that operation up to speed, expect increased competition for the processing business of online retailers, says payments consultant Steve Mott of BetterBuyDesign. “Many of them will have multi-year contracts, so there will not be a mass exodus right away,” Mott says. “But in time there should be a very vigorous competition for these customers.”
More of the details of the division of contracts and assets will be forthcoming over the next few months, says Mia Shernoff, executive vice president of marketing at Chase Paymentech. Ultimately, she says, retailers will benefit, “because online merchants will get two companies very focused on investing in the business in their own way.”
However, First Data will get a copy of the Salem technology and is expected to launch its own e-commerce processing operation. Once First Data gets that operation up to speed, expect increased competition for the processing business of online retailers, says payments consultant Steve Mott of BetterBuyDesign. “Many of them will have multi-year contracts, so there will not be a mass exodus right away,” Mott says. “But in time there should be a very vigorous competition for these customers.”
More of the details of the division of contracts and assets will be forthcoming over the next few months, says Mia Shernoff, executive vice president of marketing at Chase Paymentech. Ultimately, she says, retailers will benefit, “because online merchants will get two companies very focused on investing in the business in their own way.”
A First Data e-commerce processor would join an already crowded field in which prices keep going down, especially for larger online retailers. The competition among large processors has driven processing costs for big e-retailers down to under a penny per transaction, says Allen Weinberg of the Glenbrook Partners payments consulting firm.
(Editor's Note: Regardless of lower processing fees due to competition, the Interchange Fees remain much higher than they would be if processed as a "PIN Based" Transaction)
There are certainly plenty of alternatives, but as of now...they're all the same. Providing online retailers with a PIN Debit/Credit option would place HomeATM into a unique position to change the way transactions are done online.
Meanwhile, consumers have several ways to pay other than the familiar pieces of plastic carrying the brands of Visa, MasterCard, American Express and Discover. Adoption of alternative payments is growing gradually and analysts expect it will pick up—especially if more merchants offer and promote these alternative payment types.
Many consumers continue to shy away from buying online because they fear their personal or payment card information will fall into the wrong hands. (What I call the "Hand It Over Buddy" effect) and why yesterday I posted my article entitled: "Reverse Matriculation: Bringing the POS Device Home" in which I talked about why we should put the swipe/PIN Entry device into the hands of online shoppers so they don't have to enter card information.)
In a survey late last year, 75% of respondents agreed that they did not like giving out their credit card number or personal information online, including 36% who strongly agreed with that statement.
Meanwhile, consumers have several ways to pay other than the familiar pieces of plastic carrying the brands of Visa, MasterCard, American Express and Discover. Adoption of alternative payments is growing gradually and analysts expect it will pick up—especially if more merchants offer and promote these alternative payment types.
Many consumers continue to shy away from buying online because they fear their personal or payment card information will fall into the wrong hands. (What I call the "Hand It Over Buddy" effect) and why yesterday I posted my article entitled: "Reverse Matriculation: Bringing the POS Device Home" in which I talked about why we should put the swipe/PIN Entry device into the hands of online shoppers so they don't have to enter card information.)
In a survey late last year, 75% of respondents agreed that they did not like giving out their credit card number or personal information online, including 36% who strongly agreed with that statement.
