Credit cards: bright future or survival of times past? eMarketer research

Most online buyers pay with credit cards. But the online credit card retail purchase volume growth rate is falling, and not just because of the recession. 

Data from a January 2009 Javelin Strategy and Research study reveals that credit card purchase volume will continue to grow online and command the largest market share among payment types, reaching $107 billion by 2013, up from $81 billion in 2008. 

Yet that is less than a 6% compound annual growth rate (CAGR), and the percentage of online purchases made with credit cards is set to fall to 40% in 2013, down from 59% in 2007. Javelin said that the share of online purchases made with private-label and prepaid cards would increase during that time. 

The increased usage of other payment types is not an outright rejection of cards; Javelin estimated that e-mail payments such as PayPal would still account for only 10% of online purchases in 2013, up from 7% in 2007. 

Rather, prepaid and debit cards may be viewed as ways to avoid interest charges, and private-label cards frequently have loyalty or rewards programs that give users cash or products back. 

Some online buyers are still concerned about credit card fraud as well. In 2007, JupiterResearch and Ipsos Insight asked users of alternative payment methods including PayPal why they did not use credit cards, and the findings are worth remembering. 

More security was the top reason given by online buyers for using payment services instead of credit cards. Respondents also said they used such services because of restricted options on credit cards, and greater flexibility, more convenience and easier dispute resolution than when they used credit cards.