E-payment market could become oligopoly, study says

The popularity of shopping on the Internet has created a budding market for online payment services that will be dominated by a handful of key players.

The ever-growing popularity of shopping on the Internet has created a budding market for online payment services, but one that will be dominated by a handful of key players, according to a report published Tuesday by the German subsidiary of the consultancy Booz Allen Hamilton Inc.

The consultancy estimates the market for e-payment services to grow from Euro 13 billion (US$16.3 billion) in 2008 to more than Euro 40 billion by 2010.

Three or four international providers of e-payment services will control the market, according to Booz Allen Hamilton, with PayPal, an eBay Inc. subsidiary, and Google Inc.'s Checkout already tapped to be among the key players.

Service providers that don't establish a significant market position over the next year or two will find it difficult to establish sufficient economies of scale to operate profitably.

Over time, the e-payment services of these companies could become a major competitor to credit cards and debit cards, both used to pay for more than 90 percent of goods and services on the Internet today, according to Booz Allen Hamilton.

But capturing greater market share will require lower user fees, for retailers and consumers alike, the consultancy said. Large discounts will be required to attract big Internet retailers, such as Amazon.com Inc.

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