Emerging Payments

eBay Sees Critical Mass Growing in PayPal’s Mobile Wallet Disruption

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EBay’s foray into mobile wallets via its PayPal unit is drawing consumers’ attention—giving it an inroad to compete with myriad other entrants flooding the mobile payments market, according to PayPal’s Mark Lavelle.

“We have 50 million accounts in the U.S., that’s a critical mass that’s underpinning our [mobile commerce] efforts,” said Lavelle, senior vice president of strategy and business development, PayPal, while addressing the Keefe, Bruyette & Woods Cards, Payments & Financial Technology Symposium in New York on Feb. 11.

PayPal faces stiff competition in the mobile wallet space from Google, the telecom-driven Isis, the card networks, merchant consortia and issuing banks that are plotting their own wallets. The rush to the market doesn’t surprise Lavelle.

PayPal SVP Mark Lavelle

“The iPhone is only five years old. At a presentation at launch, Steve Jobs came on stage and said: ‘We’re using a new product that’s changing the screen for the iPod, a revolutionary way to connect to the Internet and a new way to use the phone—and it’s all there in one place.’ Everyone in the room then stood and applauded,” Lavelle said.

“We’re now having a Steve Jobs moment with the digital wallet. The opportunity is large because of the pervasiveness of how we use money and how we use mobile,” he added.

The trick for mobile wallet developers is to distinguish themselves. Isis has been touting its enabling technology in tests at transit systems, while Google’s selling point thus far has been its ability to ply search, geolocation and advertising platforms as part of a lure for merchants. PayPal contends its advantage is a ready-made consumer and merchant market that’s anxious to adopt mobile commerce.

“Our customers want to see PayPal used in other places…they want to see PayPal used on other parts of their lives,” Lavelle said.

PayPal, which processed about $14 billion in mobile payments in 2012 and is projecting $40 billion in mobile payments in 2013, says it signed up 23 retail merchants to accept PayPal in-store over the past year, and is accepted at more than 18,000 locations in the U.S. It’s also counting on its recently announced partnership with Discover to increase that network even further—and help drive more people to use their PayPal account to execute mobile payments in stores.

Like Google, PayPal is also offering a cloud-based mobile payment system at the point of sale, which is designed to reduce upfront expense in hardware migration and is seen as short-term fast-deployment alternative to Near Field Communication technology. NFC is not currently available on many smartphones (most notably, the iPhone) and requires more work to upgrade merchant terminals—though most phones and retailers are expected to adopt NFC in the next few years.

“Convincing merchants to accept mobile payments has proven to be much easier than it would have been five-to-10 years ago. They are facing increasing competition from Amazon and consumers that are ahead of them in [mobile tech] expertise. The retailers have to future proof their businesses, and payments underpins all of that,” Lavelle said.

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