PayPal Plans Move Into Stores
PayPal, the online payment service, is serious about giving Visa, Mastercard
and Amex a run for consumers’ money and that includes moving into brick and
mortar stores.
"If you’d asked me two years ago when would PayPal be in retail
environments, I don’t think I’d have said ‘by the end of 2011,’
but that’s
the truth," wrote Scott Thompson, president of PayPal, on the company’s
blog. "Our developers started taking us there as soon as we opened our
platform in 2009 and now many of our developer partners, like Yorder and Bling
Nation, have delivered new services and products that are designed primarily
to reach consumers offline."
"These new ideas, coupled with the incredible
rise in connected devices and smart phones, have pushed traditional lines between
online payments and offline purchases together — opening up an entirely
new market for PayPal as the megatrends of mobile, social and local collide," Mr.
Thompson added.
PayPal management, according to a Bloomberg News report,
believes that in-store transactions could help the eBay division double its
revenue by 2013.
"The top executives of Visa and MasterCard must lay awake at night wondering
how many years it’s going to be before these folks are substantially
impinging on their business," Bill Smead at Smead Capital Management,
told the news service.
PayPal announced this week that it has hired Don Kingsborough,
founder and former CEO of Blackhawk Network, the subsidiary of Safeway responsible
for placing gift cards in thousands of retail stores, to help bring PayPal
into physical stores.
"Don’s experience in consumer product development, technology, retail,
POS and merchant relationships will prove invaluable as we work to bring PayPal
to connected devices and the offline world," wrote Mr. Thompson.
Discussion Questions
Discussion Questions: How will alternate payment methods affect retailing in the next five years? What form of payment do you expect to achieve the greatest penetration in the consumer market?
Ultimately mobile payment, both for brick and mortar and e-commerce transactions, will likely become the primary means of executing a transaction, at least for younger consumers. Credit card companies need to move away from providing “cards” (which they already are) and into providing convenient virtual services to prevent PayPal and similar digital payment companies from seriously eroding their customer base.
Great Move! Watch out Visa!
Paypal’s new plan will allow consumers the ultimate flexibility to use one credit account online, in-store, on mobile, wherever…without messing about.
I’m a little surprised that the big guys didn’t chase them down already. But it looks like David could get the better of Goliath here.
When I read that PayPal hired Don Kingsborough, founder and former CEO of Blackhawk Network, to help them bring their payment service to traditional retail environment, here is what I said to a friend. “These guys are about to re-define priceless.”
This is a market-changing commercial innovation if I ever saw one.
Consumers will use whatever form of payment is the easiest or provides the greatest incentive. Retailers will push consumers to use the methods that come with the smallest transaction fees, but will not push too hard for fear of alienating customers. Keep an eye on mobile phones.
This looks like Blockbuster versus Netflix. Better easier faster cheaper.
Retailers are hopping mad about traditional credit card interchange fees, and the card issuing banks are fighting back after they lost the debit card fight. Any alternative to the greedy big guys will be appealing both to consumers and to retailers.
I have a PayPal “business pro” account. PayPal credits one’s PayPal account immediately upon receipt (from a “takes 24-48 hours,” “verified” sender), funds which can then be sent to others immediately, however, paying a big surcharge, almost 4% of the face value of the transaction. Moreover, it takes 5 days to get the actual cash from PayPal. They will have to also fix this before they will be able to compete.
Who would have thought years back we would not have to use checks to pay monthly bills? The same thought process is now in play for the credit card companies. PayPal is an innovation whose time has come to march onto the major playing fields and compete with the Big Three. Technology pushes us further, faster and smarter.
PayPal has a more comprehensive service than any credit card offers. It empowers the user. Many people now paying their bills online, saving the cost of stamps, so they are accepting of PayPal. Additionally, PayPal has done good work in security and problem resolution between buyer and seller. The problems I see for retailers are first the cost and second the connection. PayPal fees make American Express look cheap. Many retailers will resist unless they lower their fee. With debit card fees soon to be more realistic, this becomes a bigger problem for PayPal. Second, is retailers have invested much in a secure payment system. Unless they can easily and quickly connect to PayPal, this will not work. PayPal must be equal to or faster at checkout to be competitive.
Smart move on PayPal’s part, as they have a simple, quick system. They will find current users who have made online purchases through/with them, to be pleased.
However, this is about the consumers’ money. And, people don’t typically make FAST DECISIONS when it comes to parting with their dough. They are not going to change overnight, which provides the card companies an opportunity to make adjustments.
Don’t count VISA, Mastercard, American Express, Discover, etc. out of the game. They do billions in exchanges, they have been nicked by the changes in the Dodd-Frank bill from which they will have to work to recoup revenues, and they have a franchise to protect. Oh, and they are very profitable — that puts them in a position to defend their role in consumer’s lives.
The BIGresearch September Consumer Intentions & Actions (CIA) forecast that the consumer was planning on spending more on their credit cards in the next 90 days. That outlook continues over the course of the next 90 days. Keep an eye on the consumer — not just PayPal’s customer, and you’ll have a better picture of who is going to win out in this expanded arena.
We’ve accepted PayPal on our website for many years now. We also allow customers to choose traditional credit card payment and Google Checkout; in the last two years, the number of PayPal transactions has risen to the point that it does compete with the amount of credit card payments we accept through our merchant account. I have been using my PayPal debit card more often to buy supplies for our business; I believe PayPal will continue to grow and view acceptance in brick and mortar stores as a natural progression.
The real pain point in payment is the credit card fees. It’s much more painful than anything on the consumer or bank sides of the equation. If PayPal positions themselves the right way in merchants’ eyes, and given the installed base online from which they are working, they definitely have a shot to shake things up.
I use two forms of payment for online purchases: Debit card and PayPal. Historically, I’ve used the debit card for about 80% of these purchases, but that’s changing. PayPal offers a charge dispute service unmatched by my Chase debit card. If I dispute a PayPal charge, there are immediate and very satisfactory results. But if I dispute a debit card charge, Chase’s policy is to cancel my card and issue a new one within a week (that’s the expedited service). A week without my primary form of payment for nearly everything? Changing my automatic payment information with numerous utilities and vendors? It’s a pain. For online purchases, I like PayPal better.
Now for brick & mortar. When I use PayPal online, they charge me through my Chase debit card without all the onerous Chase debit card policies (described above). In-store I expect it to work the same way, so why not just use my debit card? Disputing charges from b&m stores almost never happens and is much easier than with online purchases. So, where’s the benefit in using PayPal in stores? Will there be a PayPal card or will all of their in-store transactions be done via smartphone? How will PayPal charge shoppers who use their service – through an existing bank account, debit card, or credit card? I have yet to see how there is NOT a middle-man financial service between the store and PayPal. A middle-man like a customer bank account, for instance. And PayPal is not a bank, yet.
PayPal’s momentum might fizzle out when some of the security issues they face are better known to the public. Easy is the sell pitch; security is the key to future success.
Pardon me but I don’t understand! Why would anyone want to use PayPal at retail? PayPal currently requires a client to be connected to a charge card or bank account or both. How can they possibly integrate their service at retail without duplicating services and/or service charges? Do I have to carry a PayPal card and what will it do differently form my other cards. PayPal is convenient for online transactions in that it saves me time and provides some security. What will it do for me at retail. For something to be successful it has to offer value, sorry I can’t see any here!