PayPal Inc.’s Oct. 26 announcement that its transactions would be integrated into VeriFone Systems Inc.’s mobile point-of-sale product after Jan. 1 is a clear sign PayPal wants to move beyond e-commerce transactions, observers say (see story). 

The advent of PayPal into face-to-face transactions is certain, Adil Moussa, an analyst at Boston-based Aite Group LLC, tells PaymentsSource, suggesting PayPal one day will have its own payment network.

The next big question is how to build it, Moussa says.

PayPal and VeriFone, both based in San Jose, Calif., are working on a reseller program for independent sales organizations, but details are scant (see story). 

ISOs should be preparing to start selling payment services such as PayPal acceptance, Moussa says. “This is going to be the way of the future,” he says.

The sales pitch should not be difficult for ISOs and their sales agents to pick up, Moussa says. “It will be a matter of talking to merchants and the opportunities for merchants,” he says.

Merchants likely will not pass on adding another payment-acceptance method because their need for revenue is so great, Moussa says. “It’s very painful for a merchant to turn down a transaction,” he notes.

As a PayPal competitor, Newtek Business Services Inc. contends PayPal’s entry into mobile payments represents an industrywide push to acquire more merchant customers, says Barry Sloane, chairman of the New York-based company.

“It’s a race to acquire the customer,” he says.

Newtek offers merchants a product called NewtPay. Aimed squarely at PayPal, the service offers lower rates than PayPal. For example, merchants with a NewtPay Pro account pay 2.19% of the sale plus 26 cents, according to Newtek’s website. That equates to $1.36 for a $50 transaction. PayPal Pro merchants pay 2.9% plus 30 cents, according to PayPal’s website. That amounts to $1.75 cents on a $50 purchase.

Newtek also is working on a mobile-payment product.

With Newtek’s strategy set at undercutting PayPal pricing and targeting acquirers, PayPal has to reveal its long-term growth strategy, Sloane says. “It will be interesting to figure out where they ultimately position themselves,” he says.

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