Banking Review

PayPal vs Credit Cards

Research from Nielsen Online has tagged PayPal as the most preferred online payment method in Australia and the UK. There are more than 141 million PayPal accounts worldwide. In 2007 more than $47 billion in payments were processed by the service. There are also more than 100,000 websites worldwide that accept PayPal.

PayPal has risen to such dizzying heights through its integration with parent company eBay. However, it is now asserting itself as a challenger to other traditional payment options.
In Australia there are more than 5 million PayPal users. In the second half of 2007 31% of Australian online shoppers preferred using PayPal compared to 22% using VISA and only 12% using Mastercard, according to the Nielsen research.

The third largest online retailer in Australia, dStore, has been accepting PayPal for more than two years. CEO of dStore, Andrew Cooper, told Online Banking Review, “PayPal competes with BPay as a payment choice. We have seen the popularity of BPay eroded since introducing PayPal. BPay used to represent 15% of payments, now it’s 10%. PayPal accounts for about 15% now. However VISA is still the dominant payment method used by our customers.”

“We have found that PayPal is often used by our younger customers. Most customers have been trained to use PayPal by eBay so that makes it a familiar and trusted online payment choice,” Cooper says.

With PayPal proving to be highly popular with customers why have financial services providers not embraced the payment trend? Personal insurance is most suited to offering a variety of online payment options. However, to date, no Australian insurance provider has diversified their payment choices.

Paul Malt, Director of IT at A&G Insurance Services Pty Ltd, owners of Budget Direct and IBuyEco told Online Banking Review, “We continue to monitor the market and assess payment options for our customers. However neither BPay nor PayPal allow automatic deductions that are essential for our pay-by–the-month customers. “

“Even customers who pay annually may make changes throughout the year to their policy, so credit cards and direct debits are again easier.” Malt continues. “Until periodic payment facilities are available by BPay and PayPal they probably won’t be offered.”

Nicholas Scofield, GM of Corporate Affairs at Allianz concurs. Scofield told Online Banking Review, “Without supporting installment billing PayPal isn’t a consideration.”

“We do recognise that there is a significant group of people who do not like to use their credit cards online. PayPal works well when trust is an issue, as there can be with eBay stores. However we don’t have trust as an issue with our customers.”

“POLi is an online payment option we are considering. It does allow installment payments, so this may address the needs of customers who do not want to use their credit card online.” Scofield continues.

Will online payment services like PayPal and POLi gain traction with financial services products?
Would an increased choice in payment options increase online sales of products like personal insurance, life insurance and income protection?