Cash is King (except in ecommerce)

| By: Michael Harvey

Addressing the need for innovations in Ecommerce Payment Options

Last week, we took a look at how Amazon might revolutionize the way that people make online payments with the announcement of their new digital currency, Amazon Coins. But they’re hardly the only company that is rethinking the way people complete online transactions.

In the world of ecommerce, cash has been more like court jester, than king. But according to a recent report from the FDIC, one in four people in the United States doesn’t have access to a credit card or checking account. That means when they buy something they do it with cold, hard cash. Up until recently that made online purchases a near impossibility. Someone could buy a gift card and use that online. But if they have to go to the store to get the gift card, they might as well just purchase their item while they’re there.

In 2009, a company called PayNearMe decided to address this problem. The company launched a network of machines at 8,600 7-Elevens and ACE Cash Express stores across the country that allow customers to complete online transactions using cash. The way it works is pretty simple. At the online checkout at a participating ecommerce site, a customer would select PayNearMe as the payment option. They could then print out a voucher, take it to their local 7-11, and complete the transaction by inserting cash into one of PayNearMe’s machines. For the most part, the service has only been used by large online merchants that could integrate it with their existing systems. But last month the company launched PayNearMe Express which is a new web-based solution that is accessible to small businesses.

Payment systems like this open up a whole new market of customers. But they’re not without some issues. For one, the nature of PayNearMe’s system still requires the customer to leave their home to complete the sale. That eliminates one of the major selling points of online shopping—convenience. Maybe more concerning are the illicit means for which these systems could be used. They present a risk to consumers to become the victims of fraud. Under current law, consumers are protected from credit card fraud and can only be held liable for up to $50. But there’s no protection for cash payments. And if we let our imaginations run wild, could cash payment systems also be used to run complex money laundering schemes?

Regardless of how these issues play out, ecommerce clearly continues to drive innovation across the gamut when it comes to payment mechanisms and now seems set to disrupt our notions of what cash even is and how it can be put to use. Until now, online merchants have had no means to serve the un- and under-banked, literally leaving cash-money on the table. Cash may never be king in the world of online payments, but with some more effort, it could be a prince.

Photo via Mashable


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