More rigorous credit policies at
major US banks are leading to increased interest in alternative
payment systems among both merchants and consumers. David Lavelle,
head of strategic planning at online payments firm Bill Me Later,
spoke to Dan Jones about
the company’s plans following its acquisition by eBay.

PayPal/Bill Me Later - registered accountsOnline marketplace eBay
purchased, an increasingly significant competitor
to eBay’s own market leading e-payment business PayPal, for $945
million in November 2008. The two companies are now working on
integrating their businesses, confident the current challenging
environment is nonetheless conducive to developing an even greater
market share of US consumer payments.

Revenue and net total payment volume in eBay’s
payments business unit also rose in the first quarter on the back
of the Bill Me Later acquisition – up 11 percent to $643 million
and 10 percent to $15.86 billion respectively.

Bill Me Later allows online consumers in the
US to circumvent the need to use credit cards for e-commerce,
instead requiring them to enter the last four digits of their
Social Security number. This enables the firm to assess customer
information at credit bureaus and, if requirements are met, extend
them credit in less than three seconds. A bill for the services is
subsequently sent to customers by mail.

Charges typically come in at between 30 and 40
percent less than those levied by credit card companies, making the
service an attractive one for retailers.

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David Lavelle, head of strategic planning at
Bill Me Later, told RBI the integration of Bill Me Later
and PayPal is going “very well”. “The biggest thing we are seeing
is the response from merchants – how interested they are about
being able to access Bill Me Later and PayPal through one
relationship,” Lavelle said.

Stressing that Bill Me Later and PayPal will
remain separate businesses with separate brand identities, he said
the business “is still in the low 30s in terms of penetrating the
top 100 online retailers [in the US]. We are looking to extend that
by making it easier for merchants to access services both from a
sales perspective and from an ongoing delivery and platform

PayPal’s wider reach has given it a much
larger customer base. In comparison to Bill Me Later’s 4 million
customers as of end-2008, the combined PayPal and Bill Me Later
entity had 73.1 million active registered accounts at the end of Q1
2009. “PayPal’s 70 million customers represent a huge opportunity
for Bill Me Later to grow in the minds of the customer.”

Moreover, as of the end of 2008, PayPal’s
total payment volume represented about 9 percent of total

Unable to decouple from US

Inevitably, however, Bill Me Later
has been unable to decouple itself entirely from the deteriorating
fortunes of the US economy. The firm’s 90-day delinquency rate rose
from 3.94 percent to 4.57 percent quarter-on-quarter in the first
three months of 2009. Gross receivable balances were down $49
million to $556 million over the same period.

“We have had and maintained a very rigorous
credit posture here,” said Lavelle, adding the drop-off in balances
was also in keeping with seasonal, post-holiday period trends
observed across the wider retail sector.

He asserted that the contraction of the
private label and co-branded credit card industries means that
“major retailers are losing access to one of the more powerful
market tools they have, which is a credit programme. We are still
in the market and still very bullish about aligning with merchants
on these programmes, which is why I think we will continue to take
share in this environment”.

The alignment with PayPal will enable Bill Me
Later to increase its incentives to individual customers and to
adroitly establish the relative revenue value of a particular
customer and target its promotions accordingly.

Lavelle added: “There are two parts to our
marketing formula – making it easier and safer for the customer to
close the sale, and building a greater relationship with customers
that have the potential to be long-term value customers. No-one has
a greater ability to combine those two than ourselves and

Ultimately, that customer base is unlikely to
be confined to the US alone. With over half of PayPal’s business
coming from international markets, expansion overseas is a definite
part of Bill Me Later’s long-term strategic plan, according to
Lavelle, notwithstanding the challenges inherent to such

“While there may be demand in other markets,
either the regulatory environment or the data infrastructure may
not be at a point where you could have the success you have in the
North American market,” he cautioned. “That said, PayPal has active
partnerships all over the world. We have ambitions to have our
platform implemented on a global basis, but it will be a multi-year