Digital Transactions Authoritative, insightful and timely information for payments professionals
EBay Inc. chief executive John Donahoe on Wednesday appeared to open a door for PayPal Inc. to serve as a funding source in Apple Inc.’s new Apple Pay mobile-wallet service and to adopt near-field communication to link mobile devices with merchant points of sale.
Without saying whether PayPal is actively negotiating with Apple, Donahoe told stock analysts during eBay's third-quarter earnings call that PayPal “will work toward whatever’s right” for its users. “With respect to Apple, it remains to be seen,” he said, adding, “we remain hopeful.” Apple has enlisted card issuers accounting for better than 80% of U.S. credit card volume to include their products in the Apple Pay wallet, though PayPal was conspicuously absent from the computer giant’s glitzy Sept. 9 unveiling of the new mobile service.
At the same time, Donahoe said PayPal has adopted a more sanguine attitude toward NFC technology in the wake of Apple Pay’s announcement. The Apple service will rely on NFC for in-store payments. NFC is also expected to get a boost from U.S. merchants’ conversion to Europay-MasterCard-Visa (EMV) chip card acceptance; most EMV terminals are expected to support NFC transactions. Merchants have until next October to to install EMV terminals and avoid assuming liability for counterfeit card fraud.
Asked by an analyst whether PayPal would look more favorably on adopting NFC, Donahoe answered, “The short answer is yes. PayPal has always been technology-agnostic around how consumers want to pay.” Donahoe predicted NFC will achieve widespread adoption within one to three years. “For a while, we thought NFC wouldn’t get fast adoption,” he said. “Now we think that will get accelerated from a three-to-five-year horizon.”
Donahoe’s new outlook on NFC represents a marked departure from his position two years ago, when he derisively dismissed the contactless technology as standing for “not for commerce.” PayPal’s in-store mobile-payments service relies on consumers entering a PIN and a mobile-phone number at a point-of-sale terminal to make payments. The company will process a projected 1 billion mobile transactions this year, Donahoe said.
On the matter of eBay’s spinoff of PayPal, slated for the second half of next year, Donahoe had little to add following his Sept. 30 announcement of the separation. “Now our focus is on moving forward with clarity and speed,” he told the analysts. The two companies are expected to hammer out commercial agreements prior to the spinoff to maintain mutually beneficial arrangements, such as PayPal processing for eBay’s marketplaces and eBay’s funneling of transaction data to PayPal. Former American Express Co. senior executive Dan Schulman has taken over as PayPal’s president. Donahoe is expected to step down when the separation is final.
For the quarter, PayPal boosted its active account roster to 156.9 million, up 14% from a year ago. The company processed $56.6 billion on 894.6 million transactions, increases of 29% and 23%, respectively. It remains solidly profitable, with a 63.4% transaction margin after accounting for expenses and fraud losses.
