According to Online Retail Payments Forecast 2010 – 2014 by Javelin Strategy and Research, the online channel is continuing to grow in its importance to consumers. Currently, 63% of consumers indicate that they are comfortable or very comfortable with shopping online, but 22% report they never make purchases online or haven’t made one in the past 12 months.

Despite the sluggishness of the global economy in 2008 and 2009, domestic e-commerce climbed 10.8% from $185 billion in 2008, and to $205 billion in 2009. At the same time, the share of total retail sales represented by online transactions continued to rise, reaching 5.5% in 2009.

The study indicates that 70% of US consumers used a major credit card to make an online purchase during 2009. The only other two options used by more than 50% of respondents were major debit cards, and an online payment service such as PayPal or Google Checkout.

While debit share of online payments volume climbed just two percentage points to 28%, the dollar value of online sales attributed to debit cards rose 21% from 2008 to 2009. During the recent economic downturn, consumers turned increasingly to debit cards as an option to help them control spending. Debit also grew because it was one of the available options for consumers who had reached the limit for purchases on their credit cards or were unable to qualify for credit.

The online debit purchase volume was just under two thirds the level of major credit card online purchases in 2009 ($57 billion for debit card vs. $89 billion for credit card). Javelin anticipates that debit card growth will continue at a significant pace through 2011. By that time, the loosening of credit, which is expected to start rebuilding sales and share for credit cards, will begin to reduce debit’s share, says the report, causing the rate of growth for debit card sales to decline slightly through 2014. Both major credit cards and debit cards will demonstrate a CAGR of 13% between 2009 and 2014.

The declining share for traditional card payments will in part result from growing use of non-credit/ debit card options, including online alternative payments and credit services. The leading reason for the current consumer use of a nontraditional form of payment is security-related: 19% to gain greater protection from fraud or misuse of information and 14% to protect their identity. Elsewhere in the study 45% of respondents say they might choose to use a payment option they have not previously used online, for security factors.

20% also use non-traditional payment options at sites that do not accept credit cards, common among many smaller merchants.  In addition, 54% of consumers may be driven to new payment options by discount offers, and 29% rewards.

Online Retail Payments Forecast 2010 – 2014. Javelin Strategy and Research.  Nov. 2009.  Web.  10 Mar. 2010.