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Online Retailers Target Cash Paying Customers

Two key trends have dominated the retail sector this year: the robust growth of online shopping and the shift to cash payments from credit.

AP

The two may seem in opposition as online shoppers often use credit to pay for their purchases, but more often online retailers are trying to woo the cash-only customer by providing alternative payment methods.

Online retailers such as Amazon , Zappos, Cabela’s and BrassPro Shops are now offering electronic gift cards for their Web sites for customers opting to use cash on hand or money from their online banking accounts.

“The nice thing is you can do two things—buy the card and send it to someone else as a gift or you can use the gift card as a prepay method for yourself," says Marwan Forzley, CEO of eBillme.com, a provider of alternative payment options.

EBillme provides a service that allows customers to receive their bill via e-mail and then pay the retailer directly through their bank. The company recently struck a deal with ACI Gift Cards, the issuer of Amazon.com Gift Cards, to provide Amazon’s customers with a cash payment method for purchases on the online retailer's Web site.

“I think a lot of customers do tap into this for two reasons. Those who don’t have access to online banks or credit cards and also those who don’t want to use their credit cards online,” says Marcell King, senior manager at ACI Gift Cards.

With the current economic conditions, more shoppers prefer spending with cash they have rather than deferring payments on a credit card.

“There is a great consumer appetite toward paying from money they have,” says Forzley.

According to the Forzley, retailers are trying to tap into the cash-only customer base to rev up sales.

The reason, he explains, is there are about 40 million consumers who are "unbanked" or "underbanked." These are primarily consumers who prefer cash payments or do not have an online checking account.

Meanwhile, many consumers are concerned about sharing sensitive financial information online because of the potential for fraudulent transactions, according to Forzley. Payments for eBillme’s electronic gift cards can come directly from online banking accounts or can be acquired with cash payments at more than 75,000 walk-in stations.

"It's like accessing a different consumer base," he says, adding, "And your transactions are cheaper than credit cards on processing transactions because there are no charge backs or fraud," he says.

According to Forzley, there are other online retailers in negotiations with eBillme for the gift card payment method.

“There is a need in the marketplace for a simple and efficient way to allow people to buy gift cards using cash and online banking,” Forzley told CNBC.

Questions? Comments? Email us at consumernation@cnbc.com

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