So what does PayPal Inc. do for an encore?
The alternative payments provider made a big splash last week in tabbing 15 additional retailers accepting PayPal at the point of sale. In addition, PayPal revealed partnerships with terminal makers and software providers so that terminals are prepared for what the company hopes is an onslaught of consumers using the PayPal payment card.
Last week’s announcement likely isn’t the last of the big splashes (see story).
And surely, numerous less-dynamic announcements will continue to roll for PayPal, the San Jose-based unit of eBay Inc., such as the May 31 revelation that a smartphone PayPal application will allow shoppers in the United Kingdom to pay for goods at major retailers with their phones. Consumers need only to have a clerk scan a barcode image on their phone screen to connect to their PayPal account.
But what’s really in store for PayPal, considering it is forging ahead with a payment access card or smartphone application supported by a cloud-based payment system? After all, competitors such as Google Inc.’s Google Wallet and the wireless carrier-led Isis payment system expected this summer rely on Near Field Communication technology.
For now, it’s all about PayPal getting more exposure at the point of sale, but eventually the company has to educate consumers about how to use a PayPal card and why it believes PayPal offers a better system, analysts contend.
PayPal is making it quite apparent the company intends to pursue a place in the physical retail space and leverage its brand name, Paul Tomasofsky, president of Two Sparrows Consulting of Montvale, N.J., tells PaymentsSource.
Yet changing consumer habit represents the key hurdle for PayPal, Tomasofsky adds. “It’s a long process, and what PayPal is entering into will take a lot of time, money and consumer training.”
Brian Riley, senior research director and analyst with Needham, Mass.-based TowerGroup, couldn’t agree more.
In fact, Riley claims he is a PayPal cardholder yet doesn’t truly understand how to best use the card. And neither did a clerk he asked at a store terminal.
“I work in the payments industry, and if I have a hard time understanding how the card works, you can imagine what the regular consumer might encounter,” Riley tells PaymentsSource.
PayPal has positioned its prepaid card more as an “access card” to various payment options in its digital wallet, including PayPal or bank accounts, allowing consumers to either pay directly at the point of sale or at a later time.
Yet consumer uncertainty about the card doesn’t present a major challenge for PayPal, Riley contends. “I think they will figure out how to best educate the consumer, but it certainly has to be on their ‘to do’ list,” he says.
When the consumer understands how PayPal’s payment options work, it could spark a significant “breakthrough” in payments, Riley contends. “But they can’t make it mainstream until they make it easier, and the consumer really has to understand the compelling reason to use it,” he adds.
However, Richard Oglesby, senior analyst and mobile pay expert with Boston-based Aite Group, suggests consumer education will evolve over time and that PayPal has tapped its main goal.
“This is really more about [PayPal] being relevant at the point of sale,” Oglesby tells PaymentsSource. “They just want to become established at the physical retail point of sale.”
While PayPal will compete against Visa Inc. and MasterCard Worldwide at retail sites, the company understands Visa and MasterCard remain an important part of the PayPal network as well, Oglesby contends.
“PayPal is more interested in incorporating redemption transactions and marketing programs through their cloud-based model,” Oglesby says. “And they are in a good position to do that.”
One company that certainly likes PayPal’s position is Card.io, a San Francisco-based mobile payment software provider whose technology drives the PayPal Here mobile payment option (see story).
Consumers will see the PayPal logo on or near point-of-sale terminal screens far more often, and that is music to the ears of Card.io CEO Mike Mettler.
“We were not directly involved with the all of the PayPal news last week, but it will certainly drive usage of Card.io, so that’s a good thing for us,” Mettler tells PaymentsSource.
All of the new partnerships represent “a land grab for PayPal right now,” but at some point the increased exposure will help Card.io because it is likely to result in an upgrade to the PayPal Here mobile-payment software, he suggests.
Overall, PayPal is placing itself in a good spot in the payments landscape, Mettler adds.
“The latest moves are really smart on PayPal’s part because there is a significant fight going on over control of the consumer wallet, and they are locking up partnerships that are really valuable to them,” Mettler says.
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