Current Economic Climate Impacts Credit Card Usage for Online Purchases, Paving the Way for Alternative Methods During Holiday Shopping Season

Nearly One Third of Online Retail Transactions Expected to be Alternative Payments by 2013

SAN FRANCISCO, November 10, 2008 – Javelin Strategy & Research (www.javelinstrategy.com), the leading independent provider of quantitative and qualitative research focused exclusively on financial services, today announced release of its 2008 Online Retail Payments Forecast, which delves into the increasing appeal and growth of alternative payment methods and the impact it represents to banks and traditional card networks like Visa, MasterCard, American Express and Discover.

The study (www.javelinstrategy.com/2008OnlineRetailPaymentsForecast.html) finds that while online payments represents only 3.5% of total retail sales in 2008, consumers are steadily increasing adoption of alternative payment types, replacing transactions from the traditional, financial institution-controlled credit and debit cards.

“Although Javelin’s forecast predicts online debit and credit card usage will continue to dominate and grow,” said Javelin president and founder, James Van Dyke. “Alternative payment methods are becoming a preferred choice by many consumers shopping online and will continue to grow over the next five years, steadily increasing to one-third of the online retail transaction volume.”

Van Dyke adds, “During this year’s holiday shopping season we project $7.8 billion will come from alternative payments versus $35 billion from traditional online payment methods.”

Forecasted Growth in Online Retail Transactions Through 2013
The overall projected growth for online payments is expected to reach $148 billion in 2008, climbing to $268 billion by 2013. The essential shift in growth rates during the five year period trends faster for alternatives, especially those that have built brand awareness with consumers, such as PayPal; as well as alternatives for traditional companies such as Stored Value.

Javelin’s study delves into all of the alternative payment companies and forecasts each payment category’s expected transaction volume. In addition to the established alternative payment companies, it highlights a new wave of emerging alternative payments firms, which may further erode traditional credit card usage online—yet actually preserve the role of financial institutions in payment transactions.

Financial Institutions and Payment Networks Should Embrace Alternative Payments
Well-branded alternative payments companies have benefited from the current economic pressures as consumers seek more cash-based solutions. The forecast demonstrates how the channel-shift toward alternatives impacts traditional financial institutions, suggesting they proactively develop an alternative payments strategy.

“Banks and traditional card brands that don’t want to risk erosion of online transaction volume should expand their own prepaid card product offerings, while partnering with alternative providers,” said Bruce Cundiff, Javelin’s director of payments research and consulting. “By integrating alternative payments, financial institutions will maintain their position and status as the ‘agent’ for online payments.”

Key Findings:

• Alternative payments erode credit card usage more prevalently than debit card given the cash-based benefits of a debit transaction.
• Credit card issuers can supplement slowing credit card volume with prepaid products.
• Store-branded and private-label credit cards are projected to have solid growth, based on consumers migrating purchases from in-store to online.
• Three emerging alternative payment methods—eBillme, NACHA SVP and Moneta Value— leverage familiar consumer processes and provide value to financial institutions by enabling FI control over the transaction.
• With the acquisition of BillMeLater by eBay/PayPal, growth is expected for BillMeLater.
• Mobile channel growth is key to Google’s outlook and brings wireless carriers into the payments space—potentially with solutions that preserve financial institutions’ role as the transaction ‘agent’.

Learn More About Javelin’s Online Retail Payments Forecast
Subscribers to Javelin’s payment’s research service automatically received this research report. Those interested in learning more about Javelin’s subscription and custom research services may call +1.610.450.5909, email sales@javelinstrategy.com.

To request a copy of the research or to arrange an interview with James Van Dyke or Bruce Cundiff, please contact Kathleen McCabe at +1.925.225.9100 extension 15 or k.mccabe@javelinstrategy.com.

Research Methodology
Javelin created an online payments forecast model based on primary and secondary sources of consumer and census data. The primary data was collected online from a random sample of respondents in September 2008. The survey targeted 2.339 respondents based on nationally representative proportions of gender, age and income. Overall margin of sampling error is +/-2.03 percentage points at the 95% confidence level.

Companies Mentioned in Javelin’s Online Retail Payments Forecast Report
Companies mentioned or analyzed by Javelin in the report, include ACCEL/Exchange, Acculynk, Amazon, American Express, AOL, BillMeLater, Citigroup, Deutsche Bank, Discover, eBay, eBillme, Facebook, GE Money, Google, Mastercard, McAfee, Moneta, Morgan Stanley, NACHA SVP, PayPal, Revolution Money, TrialPay, and Visa.

About Javelin Strategy & Research
Javelin is the leading independent provider of quantitative and qualitative research focused exclusively on financial services topics. Based on the most rigorous statistical methodologies, Javelin conducts in-depth primary research studies to pinpoint dynamic risks and opportunities. Javelin helps its clients achieve their initiatives through three service offerings, including syndicated research subscriptions, custom research projects and strategic consulting. Javelin’s client list includes some of the largest banks, credit unions, card issuers, and technology enterprises in the financial services industry.

Media Contact Information
Name: Kathleen McCabe, Marketing Director
Phone: +1 (925) 225-9100×15
Email: k.mccabe@javelinstrategy.com