PayPal has attracted some big names to accept it at the point of sale, but it has a long way to go before its digital wallet is a part of everyday consumer life. A recent partnership with the fuel pump technology company Gilbarco Veeder-Root has the potential to change that.
"Gas stations and convenience stores are one of the pillars of the everyday spend category," says Kareem Al-Bassam, director of business development for the point of sale at PayPal. "There's a lot of value in this vertical, and there is friction for consumers and merchants that can be relieved."
Other companies PayPal has wooed include Barnes & Noble, JC Penney, Toys "R" Us, Jamba Juice, Foot Locker and Guitar Center. Each of these is a well-known national brand, but most are not as ingrained in consumers' daily routines as their visits to the gas station.
While the specifications for how people will pay at Gilbarco's Passport POS machines are not resolute, Al-Bassam says PayPal is giving merchants the ability to sell in-store items at the pump. Merchants can also advertise products they sell in the store.
"There are tons of gas stations in the U.S. (over 100K) and, on the whole, they all see tons of transaction flow – the average American spends [$2,000] each year on gas," says Dave Kaminsky, senior analyst at Mercator Advisory Group, in an email.
Once PayPal integrates with one gas station and convinces consumers to use its payment method, the company will have no problem attracting other retailers, Kaminsky says.
This collaboration not only saves consumers time and gives them a "cool" payment experience but also helps merchants, Al-Bassam says.
Though PayPal's digital wallet allows consumers to pay at the point of sale by providing just a phone number and PIN, the eBay unit also supports spending through its own app as well as merchants' apps.
Gilbarco plans to at first use PayPal's system with quick response (QR) codes, and later plans to integrate coupons, loyalty and other services, says Parker Burke, Gilbarco's product manager for payment systems.
"Our agreement with PayPal combines PayPal’s large existing consumer base looking to use their phone to pay with our expertise and leadership in retail petroleum technology," Burke said in an emailed statement provided by a spokeswoman.
Consumers will favor gas stations that support their preferred payment method, Al-Bassam says.
"If a consumer has a merchant's branded app then they'll go to that specific merchant more habitually," he says. "If the capability of paying with phone is active at a certain site, our understanding is that [consumers] will seek those sites out."
Al-Bassam gives the example of when credit and debit payments could be handled at the pump. About 15 years ago, this technology drove consumers to the specific gas stations that offered it, he says.
This partnership is the latest in PayPal's move towards acceptance at point of sale. Last year, PayPal focused heavily on its point-of-sale pursuits. PayPal started with Home Depot in January 2012 and has since continued to seek one-on-one deals with large retailers. Through a deal with Discover announced last year, PayPal expects to become an option for all Discover merchants.
This January, PayPal announced a partnership with NCR Corp., which offers PayPal as a payment option on NCR's Mobile Pay app.
Gas station pumps' are notoriously difficult to adapt to new technology. Gas stations even have an extended deadline for compliance with the EMV chip-card standard because of their nature.
But because PayPal works with a software-based system, its technology should not require a hardware upgrade to work at a gas station.
"In order to practically do anything in the [fueling] space … you have to have zero or light touch at the physical pump," Al-Bassam says.
A software-based digital wallet will be easier to integrate than EMV-chip cards or other payment systems that require new hardware. But some of the obstacles PayPal faces aren't rooted in hardware.
"Many gas stations are franchised, which can sometimes make introducing a common payment system difficult," he says. That said, "any location that has a system in place to accept plastic gift cards from the parent company could also accept a mobile payment via a company-wide system."