Introduction

For the most part, existing payment mechanisms such as cash, credit cards, debit cards, checking accounts, and stored value accounts have been able to be adapted to the online environment, albeit with some significant limitations that have led to efforts to develop alternatives.

In the United States, online payments represent a market of almost $600 billion. Institutions and business firms that can handle this volume of transactions generally extract 2%–3% of the transactions in the form of fees, or about $18 billion a year in revenue. Given the size of the market, competition for online payments is spirited.

The primary form of online payment is still the existing credit and debit card system. Alternative payment methods such as PayPal continue to make inroads, and mobile payments are expected to grow significantly. However, none of these alternative methods have become substitutes for bank and credit cards; instead, they provide consumers with alternative methods of accessing their existing bank and credit accounts.

In other parts of the world, e-commerce payments can be very different depending on traditions and infrastructure, so merchants need to develop different payment systems for each region.