Listen to Gary Marino and he'll tell you not to be too impressed by the 25 percent growth in annual online sales.
"That's not good enough," he told Forbes. "E-commerce should be growing 50 percent a year. We're going to help it get there."
The "we" Mr. Marino is talking about is his company, I4 Commerce, and his plan for growing online sales comes down to this: Consumers do not buy online for a number of reasons, including security concerns and the hassle of searching for a credit card. I4 claims to have an answer for both. It enables consumers to pay online without disclosing personal financial information and without a credit card because, with its system, shoppers can buy now and pay later.
Today, less than one percent of purchases made on the web are made with something other than a credit card. Visa (50 percent), Mastercard (30 percent), Amex (15 percent) and Discover (4.5 percent) own the internet, so-to-speak.
The I4 service, Bill Me Later, works like this. When a shopper goes online, they click a Bill Me Later button rather than one for a credit card. The service asks the shopper for the last four digits in their Social Security number along with date of birth. I4 does a quick credit check, okays the purchase and pays the merchant. Two weeks later, the shopper receives a bill that can be paid through online banking or a check. I4 doesn't take credit cards.
For those wondering about I4's ability to run a credit check in less time than it takes to okay a credit card purchase, Mr. Marino said, fewer than two percent of those using Bill Me Later try to stiff the company. That number, he said, is below the industry average.
This year, I4 expects to process roughly $1 billion in online purchases. Walmart.com, Overstock.com, Continental.com, Bluefly.com and Orvis.com are among those companies offering customers the Bill Me Later option.
Visitors to the Wal-Mart site will find Bill Me Later at the top of their payment options.
Brad Wolansky, head of e-commerce at Orvis Co., is among the fans of I4 and Bill Me Later.
According to Mr. Wolansky, I4's service "puts pressure on Visa and MasterCard to lower their fees. Before Bill Me Later, there wasn't anything from a free-market point of view to keep the credit card companies in check."
Among the services offered by Bill Me Later is interest-free financing. The Orvis site, for example, includes an offer of "no payments for 90 days" when consumers make their purchase with Bill Me Later.
Orvis likes the interest-free financing option of Bill Me Later for a very profitable reason. Although the merchant will pay three percent of the sale, the average order on the Orvis site takes a big leap from $150 to $250.
Bradford Matson, head of marketing at Bluefly.com, said the site launched Bill Me Later a year ago and has been pleased with the results. The Bill Me Later shopper buys from the site four times a year versus three times for a typical Bluefly shopper. And, not only do Bill Me Later shoppers visit to make purchases more often, they also spend 15 percent more on each shopping trip.
Discussion Questions: Have credit cards in some ways impeded the growth of online sales? Will the mainstreaming of services such as Bill Me Later significantly increase what consumers spend online? Why and how?