As PayPal Inc. continues to make announcements about what it believes to be groundbreaking payments developments, the online-payments provider and unit of eBay Inc. has earned a certain measure of respect.
When someone from PayPal speaks, the rest of the industry generally listens.
PaymentsSource sat down with Gary Marino, PayPal senior vice president of global financial services, at the recent Card Forum and Expo in Orlando, Fla. to discuss PayPal’s latest ventures and the company’s overall strategy. Marino oversaw credit card operations for Citibank N.A., and he founded Bill Me Later, which PayPal acquired in 2008, bringing Marino on board.
PaymentsSource: Traditional card networks have many issues to deal with regarding federal regulations. Does PayPal have similar worries, or is it in a position to focus on consumer trust?
Marino: There’s a yes and a no to this. Yes, PayPal feels consumers will find our payment method will serve them well. The no part is that even though we have a different point of view on strategy, the banks are important to us and we actually need those networks.
We value them really highly. Those networks are not just the big three (actually four–Visa, MasterCard, American Express and Discover). There are a whole bunch of other little networks that handle those intermediate transactions in so many different countries.
PaymentsSource: Then where do differences come into play?
Marino: Our assets are different. We own intimacy with sellers and buyers, and we own intimacy with customers. Therefore, we have the benefit of thinking of a different strategy. We think the networks will benefit from that strategy because they are in the majority of the funding sources for us in the consumer model.
We put a different layer of things on those funding sources and have a wallet that allows customers to buy safely, easily and simply in any environment and any location.
PaymentsSource: So, the value is added through a digital wallet?
Marino: The application layer is where we think we add a lot of value. We use our strategy differently because of the software we have available to us. Because we have the buyer and the seller, frankly we can go and take different types of steps.
We have more assets to do things. We have more data from those buyers and sellers, and it’s much harder when you don’t have that. There’s a fallacy that we are at odds with the networks. We actually have strong relationships with the networks.
We are empowering their products and taking them to places where they may not be able to go without us. We do believe that we can do some things faster. We are faster to react to emerging trends and global trends. That is undeniably true.
PaymentsSource: Folks at PayPal tend to categorize Near Field Communication as “just a technology and not a strategy” (see story). But wouldn’t it become part of the strategy if it eventually is proven to be the best technology?
Marino: We are not arrogant enough to say that we are discounting NFC at all. We are just saying that adoption is really slow. It has a lot of burdens associated with it. There’s no set standard. The cost to the retailer is unclear. The belief of the retailer that [NFC] can deliver what it says it can deliver is not strong. We’re just saying there is time now to give consumers what they want and it’s not going to be one technology.
PaymentsSource: Does any specific technology play into PayPal’s strategy?
Marino: We have a commitment to a strategy that is about consumers and shopping. It’s completely about making shopping easier. Many technologies can provide that. You can see that the companies we have bought–Milo, RedLaser and Where.com–were all about making shopping easier. And then we focused on delivering the best checkout experience that could take place anywhere at anytime on any device. We want it to be known and ubiquitous whether you are on your phone or on the Web. And frankly, even at the point of sale, where they have so much self-checkout stuff.
PaymentsSource: And where do the customer choices come into play?
Marino: If there is one value around payments, it’s around giving people control and flexibility. And that implies at the point of sale or away from it. They choose. You could pay right then and there, or you could go home and decide how you want to pay for it.
PaymentsSource: Wouldn’t the merchant prefer that a payment occur at the point of sale?
Marino: We can do that. You could set it up [PayPal digital wallet] to limit the choices.
PaymentsSource: But wouldn’t PayPal view it as the merchant being paid eventually anyway?
Marino: Yes, but in many cases the merchant would want to be paid right away. And we’re not saying that total flexibility is where we want all transactions to go. We are saying that if you want that flexibility and control. It may not be for every transaction, but likely every big transaction. We are saying the majority of consumers want that control.
PaymentsSource: Explain a little more how the PayPal prepaid card works.
Marino: It’s actually very different from prepaid cards. It’s more of an access card based on mag-stripe. If a consumer were to lose this card, it would be useless to someone else. It’s more of an access device to your [digital] wallet. It’s a physical way to get into the cloud at the point of sale.
You go into Home Depot and purchase items, and when using the PayPal card, it gives you options on how you want to pay. In the near future, you will be able to take up to seven days to figure out how you want to pay for your items. Or you could set it up for every time it is used to draw money from your bank account. Or you could have it set up to allow time to figure out which account you want to pay from.
PaymentsSource: So the PayPal card is a more of a key to various accounts than a card in which you can load funds?
Marino: That’s right.
PaymentsSource: What do you think when card-brand executives or issuers talk about standards that everyone should have to follow?
Marino: It tortures me. Remember, I spent 25 years on that side of the business. I was a chief credit officer for Citibank’s credit card divisions around the world. I ran many credit card businesses. The fact is, you are fighting this tide of emerging payments. You can’t create these all-encompassing standards.
PaymentsSource: So when you went to work for PayPal, did it feel like some sort of renaissance to you in terms of how different it was from what you were doing before?
Marino: My entrepreneurial spirit came out in 2000, when I started a company called Bill Me Later, which gave credit at the point of sale with literally no information, yet safe and soundly. We did it in concert with the merchant, and PayPal has the same thing to create a nice user experience around safety and security. So yes, hearing about standards and trying to force those things on consumers or merchants today just seems juxtaposed to what we’re really trying to start.
PaymentsSource: Not long ago, major retailers announced they were going to create their own mobile wallet (see story). I understand their intentions, in terms of wanting to control the customer data, but wouldn’t a PayPal-type model be something they would lean toward?
Marino: I think all it says is that merchants need more information about their customers, and the concept of a mobile wallet is really strong. I am sure the concept of multiple funding sources to drive what is really their business–more sales–is important. I think that is the eBay and PayPal strategy. We are all about shopping, about acquiring assets and packaging them so it is easier for you to shop, so you can find the item and scan it to see if it is the lowest cost. All of those are things we are doing.
PaymentsSource: How fast will change come in the industry?
Marino: We’re unique because we have the assets to create change. You can change, all you have to do is dream it. It’s really hard for the networks to innovate. I was in their seats for many, many years. Merchants are not friendly with Visa or MasterCard, and we know that. They are not partnering with intimacy, and there is no data exchange going on there. How do you solve that? PayPal is in good shape, and we feel good about where we are.
PaymentsSource: You are in a position where you don’t really need to press the issue on a certain type of technology. You have the flexibility to go wherever the tide goes as long as the shopping experience is the main emphasis. Does that sum it up pretty well?
Marino: Pretty much. Convenience, control and flexibility. And it’s simplicity for payment and completely about the shopping experience.
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