PayPal has won repeated partnerships with large merchants for its new point of sale payment system, but it paced itself with consumer adoption — a strategy the eBay unit seeks to change in 2013.

"If 2012 was test-and-learn on the merchant side, 2013 is test-and-learn on the consumer side," said John Donahoe, president and CEO of eBay, in a Jan. 16 conference call to discuss eBay's earnings. "We'll do a variety of experiments in different retail verticals and areas to try and get consumer engagement at small retailers and large."

One possible recipe for success is being sampled at smoothie maker Jamba Juice Co., which uses PayPal technology to allow consumers to both order and pay ahead with their PayPal account. This allows consumers to skip the tedious process of waiting in line to place their order, Donahoe says.

"Our focus on the consumer adoption side is solving real consumer pain points," he says.

PayPal's digital payment system for brick-and-mortar merchants allows consumers to make purchases from their PayPal account by providing just their phone number and a PIN. PayPal also allows consumers to spend by swiping a card or by signaling their presence within a mobile app.

Another pain point PayPal can address is the sheer number of mobile-pay apps consumers will be dealing with as more merchants launch their own systems.

"Our approach to it will be that you could do it through the PayPal app, or you can do it through the retailer's app and pay with PayPal," Donahoe says. And consumers might pick PayPal because "we think ultimately consumers aren't going to have 5,000 apps on their phones," he says.

PayPal aims to test these theories over the course of the year before it pushes for stronger consumer adoption. However, Starbucks has already demonstrated that a properly designed mobile-pay app can move lines faster at its stores. The coffee chain's mobile app allows consumers to manage their accounts while standing in line instead of asking baristas at the counter to reload their Starbucks card. Reloading the card at a register requires a separate transaction on top of the customer's coffee order.

Jamba Juice isn't relying on PayPal exclusively. It also works with Isis, a mobile-payments venture of AT&T, T-Mobile and Verizon Wireless.  A spokesperson from Jamba Juice didn't immediately respond to a reporter's inquiry.

For now, PayPal and Isis are competing indirectly, says Dave Kaminsky, senior analyst at Mercator Advisory Group.

While Isis is taking the long-term approach mobile wallet by tying its system to phones built with Near Field Communication chips, PayPal is figuring out how to offer cloud-based mobile services.

PayPal's direction "is more practical right now than NFC what Isis is focusing on," Kaminsky says. 

"One reason a lot of companies are investing in simple solutions" instead of NFC "is they're hoping when NFC takes off, they'll have built up some market share," he says.

PayPal is focusing first on adding merchant partners to "ensure that when we're driving customers to use PayPal in store, it's available at the places they want to shop," Anuj Nayar, PayPal's senior director of corporate communications, said in an interview.

Donahoe said it would be pointless to push consumer adoption until PayPal has more brick-and-mortar merchants accepting its digital wallet.

"To be honest, we haven't focused a lot on consumer adoption to date because we felt like if a consumer can only use PayPal once in every 10 miles, it's not going to create a lot of frequency," he said during the earnings call.

Nayar highlighted PayPal's recently announced deal with hardware maker NCR Corp. PayPal will be included as a payment option within the NCR Mobile Pay application, which is used at restaurants and other retailers that have NCR Aloha point-of-sale terminals.

The NCR partnership allows PayPal to work on another consumer pain point this year, ordering and paying at a restaurant. It's a hassle to wait for staff to take your order and bring the check, so PayPal hopes to make the process of ordering and paying easier by letting consumers view and pay their check from a mobile device.

This, and the Jamba Juice line-cutting example, represent " a variety of narrow use cases" PayPal plans to test in 2013, Donahoe says.

Not only is PayPal mobile steadily being adopted, but mobile users are also more active than PC users, says Donahoe.

PayPal added more than 5 million active accounts in the fourth quarter – the biggest gain in 8 years, says Donahoe.

PayPal's digital wallet is currently accepted by 23 major retail partners with 18,000 merchant locations.

And PayPal plans to expand further with the help of Discover Financial Services, with which PayPal announced a partnership opening up 7 million U.S. merchants. The relationship will start going live in April 2013, says Nayar.

PayPal chooses its partners in part based on feedback from its existing merchant clients, says Nayar. For example, Home Depot told PayPal it should pick up Ingenico SA to make integration easier since the home improvement store uses Ingenico PIN pads.

PayPal's net revenue grew 24%, to $1.54 billion, from the same period a year earlier. Its net total payment volume grew 24%, to $41.47 billion. EBay's net revenue grew 18%, to $3.99 billion. Its net income dropped 62%, to $751 million, compared to the fourth quarter of 2011, when eBay's higher income reflected the sale of its remaining investment in Skype.

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