Amazon invests in Bill Me Later, will employ Web payment service

December 12, 2007|By Laura Smitherman | Laura Smitherman,SUN REPORTER

Bill Me Later Inc., the Timonium company that allows online shoppers to buy without using a credit card, announced yesterday that Amazon.com Inc. became an investor in the privately held company and plans to offer the payment option on its Web site.

The companies didn't disclose the size of Amazon.com's minority investment, though the relationship is a significant one, according to executives and analysts.

It not only expands Bill Me Later's retailer network, which already includes heavyweights such as WalMart.com and Apple.com, but it enables Amazon.com, the world's biggest online bookseller, to boost its take on sales.

Amazon.com is the first retailer to take a stake in Bill Me Later.

"This represents a huge endorsement given what Amazon represents in e-commerce," said Mark Lavelle, Bill Me Later's vice president of corporate development. "It's a huge extension of our network given the size of their brand. That is really core to our strategy."

Lavelle said Amazon.com and other retailers choose Bill Me Later because its 3 million users tend to spend more than the average customer and to return more frequently to participating merchants.

He said customers like the service because they feel it's convenient and more secure against identity theft. Bill Me Later also costs merchants less per transaction than most credit-card purchases.

The companies say it has not been determined when Bill Me Later will be available at Amazon.com. As for the equity investment made by Amazon.com, executives with Bill Me Later said the money would be used for expansion efforts next year.

Scott W. Devitt, an analyst with Stifel, Nicolaus & Co., said the deal demonstrates how retailers might shave operating costs.

He said that 2 percent of Amazon.com's operating margin goes to credit-card processing fees and that Bill Me Later's costs would be about 0.5 percentage point lower.

Retailers are often frustrated in their efforts to lower processing costs with a credit-card industry that "essentially operates as an oligopoly," Devitt said.

He characterized the Bill Me Later deal as a "big opportunity for innovation in payment processing."

While much smaller than rivals such as PayPal, Bill Me Later has emerged as one of the fastest growing companies in the Baltimore region. The company raised nearly $72 million in venture capital investment last quarter, the biggest take in the state.

Customers can choose the Bill Me Later option by filling in their birth date and the last four digits of their Social Security number at participating retail Web sites.

Once customers are approved through a quick credit check, they can complete transactions and their purchases are billed through the service. If they carry a balance at Bill Me Later, they could incur interest charges.

laura.smitherman@baltsun.com

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