Now that PayPal is rolling out its point-of-sale payment system to all Home Depot Inc. stores, the payments company must make sure its terms are good enough to keep its most prominent retail partner happy.
For PayPal's newest payment system to succeed, the San Jose, Calif.-based unit of eBay Inc. must convince its merchant partners to promote its system prominently in stores. Part of PayPal's strategy is to cast itself as a more consistent and agreeable business partner than traditional payment providers.
PayPal says its system is more streamlined than conventional payment cards in that PayPal controls many of the elements that can affect its pricing.
"We have a relationship with the merchant and the consumer, [and] we can look at the economics in a much more productive way than the traditional payment providers," says Patrick Gauthier, PayPal's head of product strategy and business operations for retail services.
With PayPal's point-of-sale payment system, there is only one transaction fee instead of the separate rates merchants ultimately pay for credit and debit transactions, Gauthier says. That fee does not change over the duration of PayPal's contract with its merchant unless the contract specifies otherwise, and those contracts generally last one to five years, he says. Merchants may pay additional fees for couponing and rewards programs.
The terminal maker Ingenico SA, which PayPal works with at the point of sale, has also agreed to upgrade the software on its machines for free, Gauthier says.
Home Depot is just one of 20 merchants PayPal says it is working with at the point of sale, and for now it is the most prominent (see story). If PayPal's terms are appealing enough to Home Depot, the retailer might set the tone for how PayPal is promoted in future rollouts.
"I wouldn't expect a fast adoption right away until Home Depot promotes PayPal usage and ties it to discounts," Wedbush analyst Gil B. Luria said in an email.
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