Although security concerns keep many users from buying online, a recent survey conducted by the Strategis Group found that 90 per cent of online business-to-consumer transactions are completed with a credit card.
In its 183-page report, "Electronic Commerce: Internet Payment Systems," Strategis stated that credit card security remains a major concern to those who conduct business online, and continues to be the biggest hindrance to e-commerce, although it is no more dangerous than giving a credit card number over the telephone.
As account-based checking and electronic cash systems begin to spread, users will most likely shift to these new methods of payment systems, stated Matt Page, a Strategis spokesman.
"Credit cards will continue to be used for larger online purchases of hard goods, such as books, music, and clothing, whereas the account-based systems will likely be used for smaller purchases, most likely of Web site content, such as buying articles from a news site," Page said.
Dual-purpose platform systems - which process transactions partially on and off-line and handle credit card purchases - are currently the most popular payment systems for online shoppers, according to the study.
Other popular forms of dual platform transactions included: electronic checking, electronic funds transfer and third-party payment models which use a PIN to represent a users credit card number.
In order to relieve security concerns, many businesses are beginning to adopt and to test the Secure Electronic Transaction (SET) protocol. According to the study, the amount of time it takes to process these types of transactions is a major deterrent to their adoption. To alleviate this, business have begun to add Secure Sockets Layer (SSL), a transaction mechanism that speeds service delivery.
There are also other impediments slowing down the rate at which e-commerce is adopted.
While the Clinton Administration is fighting to keep Internet commerce tax-free, the National Governors Association is supporting the taxation of the Internet - and Internet commerce providers are awaiting the outcome, said Strategis.
Also, Internet-based payment system providers are facing a fluctuating, relatively new marketplace, said Strategis. They are in direct competition with firmly established transaction, Internet and computer companies, including: Hewlett-Packard, VeriFone, Compaq, IBM and GTE.
Other key findings of the "Electronic Commerce: Internet Payment Systems" report include:
- Internet usage is more prevalent among middle income and lower-middle income classes, impacting the slow adoption for Internet-made purchases. Eighteen per cent of users reported an annual salary higher than $US80,000; 43 per cent of Internet users reported incomes between $US40,000 and $US60,000 and 19 per cent at $US20,000 to $US40,000.
- Seventy-eight per cent of Internet users access the Internet from home, of which 46 per cent go online once per day. While the Internet is primarily used for e-mail purposes, 25 per cent of users use it to shop and 15 per cent currently use it for banking purposes. More users have paid for ordering goods as opposed to paying to access Web site content.
For the future, Internet commerce adoption will depend on the increasing number of users with Internet access. Strategis is predicting that the number of users with Internet access at the end of 1997, totaling 12 per cent of the population, will rise to 22 per cent, or 61 million users by the end of 2002. Strategis also anticipates the 18 per cent of users who currently make Internet purchases on a regular basis to rise to 30 per cent or 18 million users by 2002.
Published on March 13, the report surveyed 500 Internet users and 500 non-users.
The e-commerce report is available in CD-ROM format for corporate sites and hard-copy format for single users, both at cost of $US19.50, according to a Strategis spokesman.