While e-commerce volume has fallen well short of meeting predictions of becoming a $100 billion market by 2001, the good news is that volume is still growing at a rapid clip. E-commerce volume hit an estimated $50 billion in 2002, a 38% increase from 2001, according to Internet Retailer magazine.
  More encouraging for processors and merchant acquirers is that e-commerce transactions account for about 4% of total general-purpose credit card volume, according to TowerGroup, a Needham, Mass.-based research firm. That percentage may grow to about 10%.
  One niche garnering a lot of attention as e-commerce grows is digital content, which merchants can sell for less than $5 per transaction. Processors have struggled to find a way to make micropayments profitable, but the real hold-up is the lack of copyright laws in this area to protect against piracy and ensure royalties are paid on all copies distributed.
  "There is a lot of opportunity in this market segment, but the rights issues need to work for content providers, merchants and consumers, not just one of these groups," says David Schehr, a research director for GartnerG2, a business-strategy unit of Gartner Inc. "If the rules are too restrictive, consumers won't make use of it, and if they are too loose there will be copyright problems. It's a balancing act."
  On the servicing side, Internet merchants are increasingly offering incentives to shop at their sites, such as 10% off the first purchase or free shipping on purchases over a specified amount. "I know of merchants that are offering a $5 coupon to customers for referring a new customer," says Julie Fergerson, vice president for Austin, Texas-based ClearCommerce Corp. "A lot these types of offers are being sent via e-mail, which is a low-cost marketing channel."
  Even if these efforts do not generate significant card volume, they can only enhance a steadily growing market. E-commerce may not yet be the brass ring acquirers once thought, but it ain't hay either.

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