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PayPal Gets Physical

Meredith Schwartz -- Gifts and Dec, 5/20/2011 2:12:45 AM

Meredith SchwartzWhen it first launched, PayPal revolutionized online payments.
     Now the company wants to do the same for the real world checkout. The company, now owned by eBay, plans to introduce a redefined point of sale system with major retailers later this year, according to president Scott Thompson, incorporating smartphones and other connected devices. "We're going with a whole new experience that is different than the traditional card-like experience," said Thompson. "That requires us to rebuild the whole infrastructure around point-of-sale."
     PayPal says adding real-world payments will help it double revenue to as much as $7 billion by 2013.
     "If you'd asked me two years ago when would PayPal be in retail environments, I don't think I'd have said ‘by the end of 2011,‘but that's the truth," wrote Thompson on the company's blog. "Our developers started taking us there as soon as we opened our platform in 2009 and now many of our developer partners [...] have delivered new services and products that are designed primarily to reach consumers offline."
     PayPal is not without competition: Google and Apple are aiming for mobile payments by embedding chips in their phones that communicate with nearby objects; while Visa, Master- Card and AmEx are buying Internet payment processors.

The New Face of PayPal
Paypal hired Don Kingsborough as vice president for retail and prepaid products to oversee its expansion into physical stores.
Before his hiring, Kingsborough founded Blackhawk Network, whose business model is kiosks that sells prepaid gift cards for a variety of retailers at Safeway and other grocery stores. And that's not Kingsborough's only experience with the conjunction of retail and technological innovation: He previously founded Worlds of Wonder Toys, the brand responsible for Teddy Ruxpin and Lazer Tag. Before that, he was president of consumer products at Atari, where he led the introduction of Nintendo in the U.S.

What This Means to Main St.
     What PayPal at the register will mean for independent retailers is unclear, as is whether major retailers will see much customer interest in the new option. Online, much of the initial popularity of PayPal was due, not to major brands, but to consumers who wanted to buy from small sellers without giving out their credit card info, and small sellers who wanted an alternative to accepting credit cards.
     Paypal still relies on a connection to a bank account, so it won't compete with prepaid gift cards in the "unbanked" market. Not many Americans seem interested in mobile payment: In mid-2010, MarketsandMarkets found that mobile payment in the U.S. had an adoption rate of only 1.7 percent. That's a lot lower than Europe or Asia.
     When asked about details such as what criteria will determine whether a store can accept Paypal at the cashwrap, what equipment they'd need to buy, the fee structure, whether consumers without smartphones will be able to use PayPal in person, and the benefits to retailers and consumers of adopting such a system, a company spokesperson declined to comment.

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