Marching to the Point of Sale, PayPal Strikes Its First Terminal Agreement

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Having launched a pilot with Home Depot and a tie-in with a retail middleware vendor to bring its brand to the physical point of sale, it was only a matter of time before PayPal Inc. announced an arrangement with a POS terminal maker. That announcement came on Monday when Atlanta-based Ingenico North America, the country’s No. 2 terminal company in terms of shipments, said two of its product lines will support PayPal transactions.

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Ingenico has been piloting PayPal acceptance for six months, Greg Burch, director of business development at the terminal vendor, tells Digital Transactions News. Burch refuses to name the merchant involved in the pilot, but news emerged last week that Home Depot, which uses Ingenico devices, is testing PayPal at five of its stores. Burch adds that Ingenico plans to launch pilots with other merchants, though he doesn't yet have a timetable. “We’re prepared to start piloting with other retailers immediately,” he says.

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The Ingenico product lines that support PayPal are the i6xx series and the iSc250/350 devices, which together claim an installed base of 1.5 million in the U.S. market, according to Ingenico. Consumers can access their PayPal account either by swiping a card PayPal has introduced for POS transactions or by entering their mobile-phone number; in both cases, transactions are secured by a PIN.

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Major merchants, at which the two Ingenico terminal lines are aimed, are responding positively to the concept of PayPal acceptance, Burch says. “There’s a lot of excitement around the [PayPal] solution,” he notes, because the payment brand is well-known to consumers and claims more than 100 million active users. Merchants “like that PayPal is bringing a mobile-wallet solution that a lot of consumers are already comfortable with,” he notes.

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For San Jose, Calif.-based PayPal, the Ingenico deal cements in place a key player in physical-store checkout. “It will allow us to be treated as another financial tender,” says a spokesman for the eBay Inc.-owned company. “The merchant already has the terminal in the store, [so] it’s just a software update.”

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The Ingenico announcement follows news that AJB Software Design Inc., a Canadian company specializing in payments-gateway solutions for big merchants, had agreed to build an interface for PayPal on its platform. AJB serves more than 140 retail companies with about 250,000 terminals.

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Although the Ingenico arrangement represents the first terminal deal PayPal has struck for its new strategy to penetrate the brick-and-mortar retailing world, it’s not the first time it has made an agreement with a terminal vendor. In 2010, PayPal and No. 1 terminal maker VeriFone Systems Inc. agreed to let merchants accept PayPal on VeriFone’s PAYware Mobile application.

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Earlier, the Bling Nation payment system, which relied on mobile phones equipped with contactless stickers, had agreed to use VeriFone terminals and to allow users to tap PayPal accounts. Bling suspended operations last spring.

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The PayPal spokesman refuses to comment on whether a deal with VeriFone similar to that struck with Ingenico might be in the works. Without commenting further, a VeriFone spokesperson refers to a statement the company released Monday on mobile wallets: “Expect to see VeriFone expanding the world of digital payments and mobile wallets including PayPal PIN and PayPal NFC [near-field communication] over the months and years to come.” Dave Kaminsky, an analyst who follows the POS terminal market at Mercator Advisory Group, Maynard, Mass., says he “wouldn’t be surprised” if a PayPal-VeriFone agreement were in the offing.

For his part, Ingenico’s Burch has little doubt consumers who are accustomed to using PayPal online will readily adapt to using the brand at the cash register. “Consumers are ready for this technology, and have been ready,” he says.