Electronic version of COD available for online auctions
By Holden Lewis • Bankrate.com

Buyers at online auctions have the ability to make sure the seller isn't paid until the package has been delivered.

With Pay@Delivery, the U.S. Postal Service and CheckFree have created a service that combines person-to-person online payment, escrow and delivery confirmation. The service competes with PayPal and eBay's Billpoint, the most popular ways of e-mailing money to individuals. (Billpoint will be phased out beginning in early 2003 as eBay has agreed to purchase PayPal, which will in turn become the main stream for auction payments on the site.)

"We think with Pay@Delivery, we're actually addressing an unmet need with auction sites, which is helping overcome the fact that buyers and sellers don't know each other or necessarily trust each other yet," says Stephen Kearney, senior vice president of corporate and business development for the Postal Service.

Here's how it works:

• An auction buyer schedules a CheckFree electronic person-to-person payment through the Postal Service Web site.
• CheckFree withdraws the money from the buyer's checking account.
• The seller gets confirmation by e-mail that the money has been withdrawn.
• The confirmation e-mail has a link to a Web site where the seller goes to print a mailing label with the buyer's address and a bar code.
• The seller ships the item by Priority Mail (and only Priority Mail; Pay@Delivery doesn't work with any delivery method), using the special mailing label with bar code.
• When the package is delivered, the letter carrier scans the bar code, confirming delivery and automatically releasing the money to the seller.

Frequent auction sellers aren't enthusiastic. "In comparison to PayPal it seems a bit more complicated," writes one frequent seller on a message board. Another seller writes: "It looks like the odds of something going wrong are pretty high."

Still another writes: "I'm sorry to say I don't feel the post office should be venturing into such things. I've dealt with enough lost packages in my life to know I don't want the P.O. handling my money."

One person points out that the sign-up process requires a buyer to furnish information online including Social Security number, driver's license number and bank account and routing numbers.

Sellers even grumble about the delivery confirmation feature, which they usually find useful because it lets them prove that a buyer received a package. One critic said letter carriers forget to scan the bar code 5 percent of the time on Priority Mail, and wondered how buyers are supposed to get their money when that happens.

Promotion
Kearney of the Postal Service says letter carriers scan the bar codes more than 95 percent of the time, and that the buyer can release a payment online if the carrier forgets to scan the bar code or if the bar code is unreadable.

Executives with CheckFree and the Postal Service say employees tested the system and found it to work. "We don't necessarily agree it's cumbersome," Kearney says. "We've tried it ourselves and find it easy to use."

If sellers don't have enthusiasm for Pay@Delivery, buyers might. People who are loathe to buy in online auctions might feel more comfortable with a method that ensures that the seller won't get paid until the package is delivered. But those same people might be put off by the sign-up process. Another possible market might be people who buy things from mom 'n' pop shops on the Web, or from catalog retailers.

There's no guarantee that buyers will even know they have the option to use Pay@Delivery. CheckFree prefers to operate behind the scenes; it won't market the service directly, although it advises banks and the Postal Service in their marketing efforts. We'll just have to wait to see how aggressively the post office pushes the service, but Kearney gives a hint.

"The main purpose (of Pay@Delivery) for us is to create another way that makes it easier to use Priority Mail," he says.

Judging by the post office's big advertising campaign for Priority Mail in the past few years, it's not farfetched to imagine that it will promote the Pay@Delivery service enough for people to hear about it.

Kearney, sensitive to the suggestion that the post office is sticking its nose where it doesn't belong by teaming online payment with delivery confirmation, says the Postal Service isn't doing anything it hasn't done before; it's just streamlining things by using the Internet.

He says Pay@Delivery is an electronic counterpart to the collect-on-delivery (COD) service, which continues to exist. And he notes that the post office sells about $30 billion worth of postal money orders annually. Priority Mail already features delivery confirmation for a 40-cent surcharge.

Pay@Delivery has three price levels. The buyer can pay $1 per transaction or subscribe monthly to one of two services: $1.50 a month plus 65 cents for each transaction, or $6.95 a month for up to 20 payments and 50 cents for each payment after that. The last option would be economical to anyone who consistently has more than eight payment transactions a month.

Ombudsman
CheckFree has offered person-to-person e-mail payments since spring, mostly through participating banks' Web sites. CheckFree has offered online bill payment via the Postal Service's Web site since spring 2000.

CheckFree stands ready to act as an intermediary when buyers and sellers have their inevitable disputes, says Terrie O'Hanlon, executive vice president of marketing.

"The consumer is protected and the seller is protected in that the money is guaranteed, so they don't have to worry about a bounced check," she says, adding that in case of glitches, "CheckFree would make either the consumer or seller whole, would serve as the ombudsman."

-- Updated: July 8, 2002