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Bill Me Later�

Contributed by mm | June 23, 2004 10:04 PM PST

I ran into this internet.com story regarding Bill Me Later payment service from I4Commerce.

The service works this way:

1) Affiliated online merchants include Bill Me Later as a payment option;
2) If customer chooses the option, Bill Me Later will ask for some identification information, like customer name, address, date of birth and the last four digits of social security number;
3) Bill Me Late will then make a decision whether to approve the purchase; if approved, Bill Me Later will pay the merchant upfront, and send customer a bill;
4) If customer pays the entire balance within the grace period, no interest will be charged;
5) If customer elects to pay less than the entire balance, interest will be assessed.

Currently the service is only available at some top-tier online merchants like 1-800-flowers.com, hotels.com, TigerDirect.com and KBToys.com.

A closer look reveals the service is mostly benefitting the merchant (and the Bill Me Later itself). Merchant benefits because it pays a smaller transaction fee to Bill Me Later than it would pay in credit card transactions, and have no risks about credit dispute. Bill Me Later service benefits from the transaction fee and potential interest income. (According to the Terms and Conditions published, Bill Me Later is charging a high interest rate of 17.99% now with 25 days of grace period.)

On the other side of the table, customers receive the alleged benefits of safety as they don't need to put their credit card number online, and some customers who do not have credit card can also pay online if approved. However, such benefits are illusive and customer loses certain priviledges because:

1) By providing the last four digits of the social security number, name and address, customer is already subject to identity theft if the information is leaked. Because the service is only available at some hand-picked top online names, customer essentially has almost zero risk of having credit card information stolen in the first place.

2) By using Bill Me Later service, customer loses some typical credit card protection like credit dispute, extended warranty and limited liability, not to mention cashback rewards for some cards.

3) As the interest rate is hidden in fine prints, customer may not know the high interest rate associated with this credit line, and may choose Bill Me Later even he/she has a card with lower APR.

(BTW, Bill Me Later is very close to eBay's new PayPal Buyer Credit service. Does it mean online merchants would like to vertically intergrate the payment service business?)

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