Alternative ways to pay for goods online are on the rise, driven by online merchants looking for more consumer-friendly options and consumers looking for greater security and choice. New research from TowerGroup notes that the alternative payment method known as the "nonbank wallet" is one area to watch in 2008.
Within the last two years, the nonbank wallet category has seen a flood of new entrants. TowerGroup defines a nonbank wallet as an Internet-based storage service of consumer financial data, which helps facilitates online purchases without exposing consumers' financial information directly to the online merchant. These nonbank wallets do not replace traditional payment processes, but rather provide merchants and consumers with a secure integration layer that connects multiple payment methods and processes.
TowerGroup projects overall U.S. e-commerce retail sales reached $232 billion in 2007, though they remain a relatively small percentage of total retail sales at 5.6 percent. A graphic on these statistics is below, on the left.
Despite the fact that nonbank wallets process, settle, and fund transactions made by consumers through existing payment infrastructures, the banking industry continues to express concern over their growth and acceptance. TowerGroup believes that the concern nonbank wallets engender among financial institutions is warranted, yet more on an individual bank or provider basis than as a macro financial services industry "threat."
The challenge that nonbank wallets present to the traditional payments system will ultimately be countered by the overall value that they will provide to the financial services industry as both clients and partners. This is in addition to the value they will drive among consumers, by continuing to build confidence around and drive transaction volume of e-commerce.
The TowerGroup research report is titled "Online E-Commerce Nonbank Wallet Payment Alternatives: Bankers' Friends or Foes?" and is authored by Jennifer Roth, a senior analyst in the TowerGroup Global Payments practice. It reviews four nonbank wallet providers currently facilitating purchases over the Internet and analyzes the impact and potential threat of these offerings for bank-driven traditional payment methods.
Within the last two years, the nonbank wallet category has seen a flood of new entrants. TowerGroup defines a nonbank wallet as an Internet-based storage service of consumer financial data, which helps facilitates online purchases without exposing consumers' financial information directly to the online merchant. These nonbank wallets do not replace traditional payment processes, but rather provide merchants and consumers with a secure integration layer that connects multiple payment methods and processes.
TowerGroup projects overall U.S. e-commerce retail sales reached $232 billion in 2007, though they remain a relatively small percentage of total retail sales at 5.6 percent. A graphic on these statistics is below, on the left.
Despite the fact that nonbank wallets process, settle, and fund transactions made by consumers through existing payment infrastructures, the banking industry continues to express concern over their growth and acceptance. TowerGroup believes that the concern nonbank wallets engender among financial institutions is warranted, yet more on an individual bank or provider basis than as a macro financial services industry "threat."The challenge that nonbank wallets present to the traditional payments system will ultimately be countered by the overall value that they will provide to the financial services industry as both clients and partners. This is in addition to the value they will drive among consumers, by continuing to build confidence around and drive transaction volume of e-commerce.
The TowerGroup research report is titled "Online E-Commerce Nonbank Wallet Payment Alternatives: Bankers' Friends or Foes?" and is authored by Jennifer Roth, a senior analyst in the TowerGroup Global Payments practice. It reviews four nonbank wallet providers currently facilitating purchases over the Internet and analyzes the impact and potential threat of these offerings for bank-driven traditional payment methods.
