Big Plastic’s Online Challenger

I read this piece the other day. It’s about the new payment method set out to kill credit cards. I’m thinking, what? PayPal?

(Now, I am a bit biased because I work for eBay and PayPal is one of our companies. However, I’ve been using paypal for years, whereas I’ve only been at eBay for a little more than a month. In fact, I just had a run in with the patheticness of paper checks and the drudgery it entails. If everyone used paypal [employers, banks, rental offices], life would be easy.)

The article isn’t about PayPal though. It’s about this new fandangled Bill Me Later payment plan. Quick and dirty: Old Credit Card playa tires of the game. (Hate the game, not the playa!) He starts an alternative to credit cards for online payments. With just you birthday, last 4 digits of you social security number, and address, they approve you for the purchase amount. You then receive a bill in the mail and pay at your leisure, however you see fit.

I’m thinking, “Big deal. What’s so special about this?” Those that use it, love it, and tend to spend more. It’s that tend to spend more part retailers like. Plus, these guys charge the merchants 1.5% vs. credit cards 2%. It’s pretty much a no brainer for businesses. Business is all about 2 things: Making money and keeping as much of it as you can.

There’s an article I read in HBR awhile back. It said that change in conditions creates a change in productivity. The change could be for the better or for the worse, that didn’t matter. Just that fact that something changed spurred activity. I think that’s what’s going on here. To quote one of the users, “If you have good credit, you have got to try Bill Me Later. I have quite a few credit cards, and every time I use it(sic) over the Internet I am afraid someone is going to steal my account numbers and use my credit line fraudulently. But with the Bill Me Later option, I feel secure.” Now, I’m missing something here. Those same theives who are after her credit card numbers aren’t after this info? Heck, I’m no expert but with one credit card number stolen that card can be maxed. With all this info stolen, unlimited purchases can be made in your name. Yeah, it sounds *much* safer to me.

What about fraudulent activity though? To quote Bill Me Later, “Does Bill Me Later® protect me from unauthorized charges? Yes, Bill Me Later® provides ‘zero fraud liability’ protection; the same protection provided by most major credit cards. This means you are not responsible for unauthorized charges.” Therefore, even if that girl’s credit card number was stolen, she wouldn’t be responsible. Once again, what’s the point?

People are funny in how they don’t think things though. You place a new thought/method in front of them, and they think, “Oh, this is new. It must be better.”

My biggest gripe with Bill Me Later is that it’s one way. From what I can tell, it’s not two way. In other words, they’re taking the beauty of online, instantaneous payment processing and taking us back in time to before credit cards where only in-store credit existed. I buy something online and the paper trail begins. One of my favorite quotes from the article is from Forrester analyst Sucharita Mulpuru: “It has the potential to open online retail to a whole new segment of customers that wouldn’t have shopped otherwise.” Like who? My grandparents (or sadly enough, my parents who fear the stolen credit card thievery too). No offense, but literally, that segment is a dying breed. Today’s youth couldn’t be bothered about putting every bit of information online, much less a stinkin’ credit card number.

This company is growing and will most likely be bought for lots of cash. Really though, I don’t think they have a lasting business model. Here’s why:

– Who wants a new “credit line” for every single purchase made? (i.e. every $20 order) Hence, this will be a big purchase option only.
– How long can people be fooled? Sure, it’s a new way, but eventually, people have to realize it’s no safer than Credit Cards.
– One way only? Why use a service like this that’s only one way, when PayPal lets you send AND receive money.
– But customers spend more! That’s only because of the “90 day no payment” for purchases over $250. That’s a retail ploy, not a lasting business model.

Well, those are my thoughts. Now, when someone runs up to you and says, “Hey, I just heard of this cool feature called Bill Me Later.” You can tell them, “Thanks, but no thanks. I prefer Bill Me Now, i.e. PayPal.”