I have been fairly skeptical about PayPal’s ability to win in the mobile payments space. However the methodology the company is using doesn’t require any new devices, next-gen infrastructure or much consumer behavioral change. Today I received an email from PayPal telling me I could use PayPal to pay in stores (HomeDepot).
This is the first direct communication that PayPal/eBay has made to customers. There are two payment approaches being offered: a card and a user’s mobile number + a security pin. Either can be used in the alternative. I wasn’t previously aware of the card part; here’s how PayPal explains it:
The PayPal payment card is one of the ways you can pay at any participating store locations accepting PayPal. It’s a store only spending card linked directly to your PayPal account. The PayPal payment card can’t be used online or as a credit card.
You do not need the PayPal payment card to complete Store Checkout activation. We will automatically mail it to your home address 2-4 weeks after you activate Store Checkout.
The PayPal card isn’t required and probably won’t be widely used — maybe it’s a “training wheels” transitional product to get users comfortable with the system. The primary method is clearly the mobile + pin approach.
The following are the payment methods that can be associated with a PayPal account:
- PayPal Balance
- Instant transfer from your bank account (if eligible)
- PayPal Credit (Bill Me Later, PayPal Extras Card, or PayPal Smart Connect)
- Debit card
- Credit card
- eCheck (a delayed transfer from your bank account – may result in significantly slower shipping by seller)
Here’s the list of HomeDepot Stores that are now accepting PayPal (as well as others outside California):
Associating bank accounts and credit cards with PayPal is somewhat painful in the beginning. But if the accounts are already set up then this is a convenient and more secure way to pay than allowing a store clerk to swipe your card at the point of sale.
I haven’t used it yet, but my perception is that it’s pretty straightforward. Accordingly it could enable PayPal to gain faster consumer adoption than an NFC-based payments system like Google Wallet. We’re in a bit of a land rush period right now, and if PayPal can gain broad acceptance at stores and restaurants it could become one of the winners in the segment.
I don’t know what this looks like from the merchant side — other than to assume that the new in-store payment system is subject to PayPal’s standard
merchant transaction fees.
From a functionality perspective Google and mobile carriers could do something quite similar: enable consumers to associate credit cards or bank accounts with mobile numbers and a pin. But there’s a whole “infrastructure” that PayPal has set up that may not be so quickly duplicated by others (that’s a bit of a blind spot for me).
Regardless this is a bold new step toward educating consumers and mainstreaming mobile payments.