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PayPal Inc.’s move into the physical point of sale is likely to involve handset-based services that make shopping and buying easier for consumers rather than a direct assault on the checkout counter, according to one expert who follows electronic payments. PayPal will most likely integrate its payments platform with applications that let customers scan merchandise and receive, for example, price comparisons and product reviews, says Aaron McPherson, practice director for financial services at IDC Financial Insights, Boston, Mass.
The service, he says, would allow consumers to buy products while standing in the aisle of the store and receive a receipt on their phones. They would show the receipt to store personnel as they exited, just as customers now show paper receipts to checkers as they leave big-box retailers like Costco and Sam’s Club.
Other possibilities include integration with location-based check-in services, which would allow users to receive special offers on products at stores where they are shopping, as well as deals from social couponing services like Groupon. The key is tight integration with developers of mobile apps, something PayPal has already accomplished with its PayPal X platform, which it opened to outside developers in 2009.
PayPal’s shift into the physical world has been long expected by payments observers. At the same time, the company has denied for years that it had any ambitions beyond e-commerce. That changed earlier this month when it hired Don Kingsborough, formerly chief executive of Safeway Inc.’s Blackhawk prepaid card network, as vice president for retail and prepaid products.
In a blog posting announcing the appointment, PayPal chief executive Scott Thompson said Kingsborough had been hired to “help us bring PayPal offline and into traditional retail stores.” Thompson attributed PayPal’s move into “retail environments” to developers like Bling Nation that began pushing the company in that direction with apps that work on PayPal’s open platform. Bling Nation equips merchants to accept contactless tags that can include payment against card or PayPal accounts. A PayPal spokesperson says the processor has no comment beyond Thompson’s announcement.
McPherson says Kingsborough was likely hired to leverage his contacts and expertise in physical-world retailing. Under Kingsborough, Blackhawk introduced so-called gift card malls, large end-cap style racks of cards from a wide variety of issuers, in thousands of locations. “Right now, PayPal is not relevant at the physical point of sale, it’s just not there,” McPherson says. But with the rapid adoption of mobile devices, he adds, the processor “can take advantage of connected devices to make PayPal relevant.”
Clues to PayPal’s ambitions in brick-and-mortar retailing have been emerging for months. Last year, it signed the agreement with Bling to allow PayPal users to tap their accounts at Bling-accepting merchants. In the fall, VeriFone Systems Inc. became the first device manufacturer to join PayPal’s ranks of developers, allowing consumers to pay with PayPal on iPhones equipped with VeriFone’s PAYware Mobile application and hardware. Since PayPal lacks a physical card, users can pay mobile merchants armed with PAYware Mobile using bump, a technology that transfers data from one phone to another when the two touch.
In October, PayPal also launched a new version of PayPal Mobile for iPhone that lets users find nearby merchants that accept PayPal and allows those merchants to send offers to entice nearby customers into their stores. The app was introduced in beta in the San Francisco area, where Bling Nation has signed merchants.
