An Old-Time Touch for the Modern Shopper

By Catherine Rampell
Washington Post Staff Writer
Wednesday, November 28, 2007

Kathryn Park doesn't like giving out her credit card information. Why should she? A few years ago she said a sales clerk stole her card number and used it to bankroll his 1-800-PSYCHICS hotline calls.

So during a routine pet food order on, the 30-year-old D.C. resident noticed an option to pay without entering her credit card, and she jumped on it. She now spends about $500 a month shopping online using Bill Me Later, a payment system that allows people to buy items online but pay offline after receiving a statement in the mail.

"There is so much information about ID theft out there, and it's hard to figure out what is truly a threat and what isn't," Park said. "I like the idea of not having my credit card always out there."

Credit cards and debit cards are still king when it comes to online transactions. But as more consumers turn to Internet-based merchants, Bill Me Later of Timonium, Md., and several other companies are hoping to lure more users with payment systems that don't require them to share their billing information online.

Credit cards account for 60 percent of online sales, while debit cards account for 26 percent. About one-tenth of all e-commerce payments are made using alternatives to credit and debit cards, and of those transactions, only about one-fifth use Bill Me Later, according to Javelin Strategy and Research. In addition to the credit cards, Bill Me Later faces competition from alternative payment companies such as PayPal and the well-heeled Google Checkout.

"Dozens if not hundreds of companies have tried to make their way into the alternative payment space and failed," Javelin analyst Bruce Cundiff said.

One way Bill Me Later hopes to compete is by allowing consumers to use Bill Me Later kiosks at brick-and-mortar stores.

It's not clear how Bill Me Later's competitors are responding to the three-year-old service. PayPal, Google Checkout, Visa and MasterCard declined to comment on Bill Me Later.

But PayPal, which is owned by eBay, recently began offering deferred billing similar to Bill Me Later. Both PayPal and Google Checkout are backed by tech giants with greater staffing and resources than Bill Me Later's relatively small 201-person operation. Competitors are also adapting their businesses to offer some perks usually associated with traditional credit cards, such as offering frequent-flier miles for retail purchases.

Like Visa or MasterCard, Bill Me Later makes money by charging merchants a small percentage of each sale.

It operates much like a credit card company largely because its founder and chief executive Gary Marino has a long credit card pedigree, having served as chief credit officer for both First USA/Bank One and Citigroup. He started Bill Me Later after an investor suggested that online billing options be as simple as the "bill me later" tear-out form that comes inside magazines. The company, which is about six years old, has since received $200 million in venture capital funding from investors such as Chase Paymentech and Azure Capital Partners, as well as a $1 billion credit line from Citigroup. Marino declined to say whether the company is profitable.

The company's premise is that customers consider paper billing more secure than submitting their financial information online.

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