Digital Transactions Authoritative, insightful and timely information for payments professionals
More than 3 million PayPal users have been invited to try the online processor's virtual debit card since it was introduced in July, a PayPal executive responsible for the product tells Digital Transactions News. That represents almost 10% of PayPal's total active account base. The card, which links to users' PayPal accounts and can be used at any e-commerce site that accepts MasterCard, is still in its beta phase, says Chris George, senior director for financial products at the San Jose, Calif.-based unit of eBay Inc. The phased rollout, in which the company is asking accountholders to download and try out the application for the card, kicked into high gear just within the last few weeks with invitations reaching approximately 2 million more accountholders. The rollout will continue for “a period of months,” while no final decisions have been made about how many more users will be sought, George says. George says PayPal is “comfortable” expanding the rollout in groups as large as 1 million users at a time. “We're not publicly talking about a full rollout yet,” he says. “We're just staging a beta rollout.” PayPal has 122.5 million accounts, of which almost 31 million are considered active. PayPal is interviewing users who have signed up for the product and is monitoring a variety of usage metrics during the beta rollout, George says. “We want to monitor usage over time,” he says. While he refuses to reveal any particulars of what PayPal has learned so far or how many invitees have used the card, George says once PayPal users adopt the product, they tend to use it repeatedly. “Repeat usage is trending higher than we anticipated,” says George. He adds that what users like about the product are its security, its form-fill capability, and the “expanded reach” it gives their PayPal accounts to all MasterCard-accepting sites. The virtual debit card relies on the MasterCard backbone network, with back end processing provided by Denver-based First Data Corp. The product debits the user's prepaid PayPal account first, but should this prove insufficient it hits the user's checking account for any needed funds. To make it work, the user downloads an application that becomes part of his computer's toolbar. When the user visits a MasterCard-accepting site, the application generates a prepopulated form for payment, including a one-time account number and one-time card-verification value, the three-digit number usually found to the right of the signature panel on the back of physical cards. To produce the one-time account numbers, the application relies on software from Orbiscom Inc., a New York-based company whose product has been adopted by a number of card issuers for online use, including Discover Financial Services Inc. and MBNA Corp., now part of Bank of America Corp. One-time account numbers, also called proxy numbers, are seen by some as more secure for online buying, since they can't be re-used by fraudsters. PayPal collects debit interchange on each transaction, some of which it passes on to First Data. Virtual debit transactions are handled as if they were signature-debit payments. PayPal's virtual debit card comes as the processor seeks to extend its service beyond online auctions, which account for more than 60% of its transactions. It also comes as online processors and merchants confront an array of new Web-based payment services, the most high-profile of which is Google Checkout, a payment product from the Mountain View, Calif.-based online search giant that launched in June and is widely seen as directly competitive with PayPal. A form of online wallet, Checkout too bills itself as a secure product that streamlines the task of entering payment information on checkout pages.
