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PayPal Inc. on Wednesday projected its mobile-payments volume this year will reach $7 billion, nearly doubling the $4 billion it now says its mobile service processed in 2011. The final number for last year came in significantly higher than the $3.5 billion PayPal was estimating late in the year and well ahead of the eBay Inc. unit’s original 2011 forecast of $1.5 billion.
PayPal vice president of mobile David Marcus, who announced the figures in a blog post, credited a streamlined checkout flow, surging sales for tablet computers, and mobile’s increasing popularity among PayPal users for the dramatic rise in mobile volume. Some 17 million PayPal users now “regularly” pay with mobile devices, Marcus said, compared to 8 million in June. Marcus also cited a wider variety of merchants participating in mobile-payments initiatives with PayPal, including Starbucks, Pizza Express, Yorder, and Fandango.
Starbucks, which operates what is probably the country’s largest merchant-sponsored mobile-payments program in terms of activity, allows customers to fund their Starbucks prepaid account using PayPal. These proprietary accounts are then used to make purchases at Starbucks stores. Much of PayPal’s mobile volume is also derived from eBay traffic and person-to-person payments.
A PayPal initiative to capture payments at the physical point of sale, which kicked off recently with a trial at five Home Depot Inc. stores, is expected to contribute to mobile volume in 2012. The initiative relies on a plastic PayPal card but also allows users to pay with a mobile phone number and PIN. “There’ll be a lot of growth offline in the next few years,” Marcus said in an interview with Bloomberg West on the floor of the International Consumer Electronics Show in Las Vegas, which wraps up on Friday. “It’s a huge market.” PayPal says about 20 chains are lined up to start accepting PayPal transactions by mid-year.
Still, it’s unclear just how much this activity will help PayPal meet its $7 billion projection. Stores may accept PayPal, but that doesn’t mean consumers will be eager to use the payment option in preference to established card brands, some observers say. “It’s always more difficult to get people to change their behavior when they’re out and about” than it is online, says Menekse Gencer, founder of mobile-payments consultancy mPay Connect and a former PayPal Mobile executive.
Gencer also points out that some of the new mobile volume is likely to come at the expense of PayPal’s PC-based online business as existing users shift from one channel to the other. “I wouldn’t expect that $7 billion is completely net additional” volume, she says.
Still, Gencer agrees that smart phones and especially tablets, which have enjoyed a rapid rise in popularity among consumers over the past year or so, may well have allowed PayPal to bolster its projections for 2012. “It’s an easier interface now” with the computing power and larger screens these devices offer, she says, compared to the state of mobile technology only a few years ago. “It’s not like it was when I was there [at PayPal] in 2007 and 2008 when phones were incredibly difficult,” she says.
