December 11, 2007

Amazon Invests in Bill Me Later

Erick Schonfeld

33 comments »

Buying stuff on Amazon is about to get even easier. The online retailer took an equity stake in a Maryland-based company called Bill Me Later that lets people shop now and pay later at more than 700 Websites, including the Apple Store, Overstock, Walmart.com, and ToysRus.com. Amazon will be offering the payment option as well. (It competes with PayPal’s Pay Later service).

Terms of the deal were not disclosed, but Bill Me Later raised a whopping $72 million last quarter and has raised $200 million in total from Azure Capital Partners, Chase Paymentech, Crosspoint Venture Partners, First Data Corp., and others. It also secured a $640 million debt financing a year ago. That is a lot of capital, but as a financial firm, it is taking on a lot of risk.

The way Bill Me Later works is you enter your birth date and last four digits of your social security number online, and it does a credit check on you in three seconds to determine whether you are worth the risk. Bill Me Later pays the merchant, and sends you a bill. According to the Baltimore Sun, about 3 million people have signed up so far, and the company is on track to pull in over $100 million in revenues this year. It must have some really sophisticated algorithms to make that credit risk decision on the fly. For people still not comfortable using a credit card to pay online, this type of service removes any remaining friction in e-commerce. I wonder what its default rate is.

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Duncans Donuts

December 11th, 2007 at 8:35 am

1 Billion in resource captital. wow.
Otis Gospodnetic

December 11th, 2007 at 8:50 am

Sophisticated algos? Depends. Depends on how much they want to risk. For example, If they are willing to gamble, they could just look at the current “credit score” and pick a threshold beyond which they won’t gamble. That’s pretty trivial. If they want to play it safe, then of course they want to consult a bunch of other variables. This is a lot like what happens with “is this spam or is this ham?” decisions/heuristics - do you want to have no false positives (it is spam when it really is not) or be conservative and let some potential spam through.
Beck

December 11th, 2007 at 8:52 am

I don’t get it. How is this any better than having a credit card that I only use for Internet purchases?

How does this protect me from fraud? If this company, with whom I have no business relationship, sends me a bill for something I didn’t buy, then what?

If someone knows my date of birth and SSN then they can send me bills, right?

I guess I’m missing the point, if millions are signing up then there must be something to it, maybe someone can explain.
pffft

December 11th, 2007 at 8:54 am

Nice. Even faster and easier consumer credit. That’s exactly what we need right now. At least now all those folks with ARMs about to reset, whose credit scores are still OK for now — many of whom will face foreclosure, can run up their debts even easier. Sweet. Recession, here we come… >:^)
Bill Hunter

December 11th, 2007 at 8:54 am

Erick –

BillMeLater does not power PayLater at all — they are competitors. Where are you getting that from? GE Money powers it.

Bill
Randy

December 11th, 2007 at 9:01 am

@#4

“Nice. Even faster and easier consumer credit. That’s exactly what we need right now.”

Yes, actually it is.

People embroiled in foreclosure crises represent an insignificant minority of the population. Alas, they grab headlines, because the media hypes them up, because foreclosures are so dramatic. Forget them. The population as a whole is craving cheap money right now; most people have their house in order and can afford to borrow money at reasonable rates.
Andrew

December 11th, 2007 at 9:03 am

Go Bill ME LATER. I have been a customer for years and the best thing about it is ease of use. After first sign up at a merchant all subsequent purchases are one click.
freeadlists

December 11th, 2007 at 9:09 am

This capability seems very risky for Bill Later’s customers/signups. So does this mean a phisher just needs to intercept the signup’s birth date and last 4 and then surf over to a participating web retailer?
Mikebl

December 11th, 2007 at 9:24 am

This is identity thief’s dream!

Also, if you use this service, you increase your chances of getting collection agency on your case if the bill gets lost.

My suggestion: stay away!
hmm

December 11th, 2007 at 9:34 am

I have encountered many Maryland startups at various conferences… interesting

Anyone else notice this?
Shawn

December 11th, 2007 at 9:43 am

@2 Otis — any idea how they could get a credit score from the last 4 digits only of the Social (plus birthdate)? I’m with Eric — I’m curious what info they can get from that.
Roy

December 11th, 2007 at 9:48 am

We use it at work, and compared to some other merchant services (I’m looking at you, google checkout), it was pretty simple. We had a little hickup getting a dev account, but once we were live, it’s been smooth sailing.

But I’m programming, you’d have to find a marketing guy to see if we make more sales or the like because of it.
damon

December 11th, 2007 at 10:03 am

The key to BillMeLater is really for the retailers, with credit cards the retailer pay 3-5% to the credit card company, with BillMeLater, the fees to the retailers are in the 1% range.
Jon

December 11th, 2007 at 10:13 am

Another key to bill me later….don’t pay them back to fast. I have excellent credit and used them to buy a TV, then came into some extra money before the due date and paid it off…now they won’t approve me.
TechTownNC

December 11th, 2007 at 11:23 am

So is this like applying for a credit card? If so, it will hurt people’s credit scores, just as every new credit card you get lowers your credit score, though usually only temporarily. I am really curious about the point that #3 brought up - What the heck is your relationship with Bill Me Later?
codehaus

December 11th, 2007 at 11:26 am

@11, thats exactly what I was wondering!

the last 4 digits + B-day … there must be overlap there.
Ian

December 11th, 2007 at 12:00 pm

Sorry, but NO WAY I would use this. I don’t want to give any personal info to yet another company if not absolutely necessary and I see no problem with using a credit card, paypal, etc.
Monica

December 11th, 2007 at 12:03 pm

The key to Bill Me Later is that credit is approved per transaction. So you don’t have a credit line - you only borrow the amount you need to complete the purchase. I’ve used it several times and find it much more secure than a credit card because you never give out your credit card number online so no one can steal your account info. Then they send you a bill and you pay it, very similar to buying a magazine subscription.
AA

December 11th, 2007 at 12:28 pm

Sorry, I just don’t buy it. ID theft seems way too easy and who knows how a dispute will be handled with an also ran. PayPal works for me especially now that they have the plugin that generates one use credit card numbers.

One time credit card numbers seem nearly bombproof. I would venture to say I could safely buy a .xxx domain name off a Romanian IRC channel without breaking a sweat.
RG

December 11th, 2007 at 12:43 pm

I’ve tried those one time use credit card numbers and there are problems when the website asks for the three-digit security code. I have had a lot of headaches about that. I’m going to look into Bill Me Later some more to see about fraud and security. I’ll post what I find out.
RG

December 11th, 2007 at 12:49 pm

the Bill Me Later website says users have Zero Fraud Liability and don’t have to pay for any unauthorized charges.
Marty

December 11th, 2007 at 12:54 pm

So, the real question is what does this do to Amazon Payments? Does it combine with Bill Me Later, compete with them or what? See article posted here on Aug. 1.

http://www.techcrunch.com/2007.....e-checkout
Social security

December 11th, 2007 at 1:09 pm

Advice… Never give out four digit social security. I wonder how many stupid people give out personal information where companies and organizations can access your life and health.
Otis Gospodnetic

December 11th, 2007 at 1:12 pm

Shaws@11 + codehaus@16 — last 4 SS# digits + DOB let them uniquely identify a person in one of those credit report databases.

It also means this works only for U.S. consumers…bah.
AA

December 11th, 2007 at 1:21 pm

@ #23

Agreed. The company I work for treats last 4 of SSN just like full credit card numbers. Even though the standards are spotty when it comes to partial SSN, we feel that the broad use of last 4 as a proof of identity warrants protecting them as well as a full credit card or bank account number. Afterall, you can always have a bank re-issue a card, but it would be nearly impossible to get a new “last 4″
Steve Ballmer

December 11th, 2007 at 1:23 pm

Bad concept!
Rosie Escobar

December 11th, 2007 at 1:34 pm

Bill Me Later is an interesting service. There is little risk to the retailer, and that payment type actually results in much higher average orders sizes. However, the down side is that the retailer could disappoint some customers since BML requires a pretty high rating to get approved for that financing (and that is what it is, financing). There is some cool things a retailer can do with that service, though…. things like 90 days same as cash, etc,…

I thought amazon tried BML back in the day, but then took it down. Does anyone remember that?
Jon

December 11th, 2007 at 3:47 pm

Hmmm… isn’t this the business model that credit card companies use? Wouldn’t it be more efficient to simply use your own credit card instead of a middle man who acts like another virtual credit card?

Jon
nemrut

December 11th, 2007 at 8:15 pm

..this could be hugefor the walmart crowd..unfortunately it suffers from poor user experience.
zel

December 15th, 2007 at 6:48 am

The more choices, the better …
Though i will prefer credit card, its good to have
another option if I dont want to give my credit card number
to “unknown site”..
I have tried bill me later once as they were giving me 90 days
no payment option, and i paid my bill online(dont trust
via post).
Ruben

December 17th, 2007 at 10:21 pm

I’ve used Bill Me Later for a couple of years now with no problems. I don’t know what is up with all the ID theft paranoia. Yes, it is just a b-day and last 4-digits of your SSN to “make a purchase” but there still is an approval process. It still must be cross-referenced with databases and credit reporting agencies. You then have to register on the BML website, once approved, and you have the option of paying with your bank account. I’ve done this for 2 years now with no problems. It’s great to see AMAZON becoming a part of it.