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Nearly 20,000 U.S. merchant locations now accept PayPal, up from 18,000 three months ago, according to data released on Wednesday in tandem with eBay Inc.’s quarterly earnings report. San Jose, Calif.-based PayPal Inc. is a unit of eBay.
The roughly 11% jump in merchant acceptance for PayPal since eBay’s last earnings release represents further progress for the e-commerce processor’s year-old strategy to penetrate brick-and-mortar stores, much as it moved off eBay’s auction marketplace years ago to win acceptance at major online retailers.
PayPal users can make purchases in stores by typing their mobile-phone number and PIN into a point-of-sale terminal. This summer, Discover Financial Services will begin carrying PayPal transactions on its network that will be based on a plastic PayPal card. Discover has links to 7 million merchant locations.
John Donahoe, eBay’s chief executive, told analysts on a conference call Wednesday that PayPal isn’t pursuing a strategy of recruiting physical merchants in targeted retail segments. Rather, he said, the company is trying to identify problems it can solve to make transactions run more smoothly for specific retailers. “I don’t think you’ll see us do merchant rollouts vertical by vertical,” he said. “It’s solving pain points in verticals.” He cited as an example a feature for Jamba Juice that lets customers order ahead via a mobile device and then pick up their order at the store, bypassing the line.
While PayPal does not disclose its offline merchant volume, Donahoe hinted it may do so later as activity picks up. “As [the number] becomes meaningful and material…we will share out progress,” he told the analysts. He repeated a point he made in January, stressing that PayPal’s current objective is simply to sign physical merchants so that PayPal users will have places to use the service. “Our primary focus is merchant ubiquity,” he said. PayPal finished 2012 with 23 retial chains signed for acceptance.
Donahoe also disclosed that one in four PayPal account holders had performed at least one transaction via a mobile device in the past 12 months. Momentum in mobile payments has been such that PayPal in January projected it will process $20 billion in mobile volume this year, up from almost $14 billion in 2012, or roughly 10% of its total volume.
In other PayPal news, the company said its PayPal Here service for mobile merchants is now available on the Apple iPad in the United States. A chip-and-PIN version is expected to be introduced this summer in the United Kingdom.
For the first quarter, PayPal finished with 127.7 million active accounts worldwide, up 16% from a year earlier. It processed 681.6 million transactions, up 23%, and $41 billion in volume, a 21% increase (dollar volume includes activity on eBay’s Bill Me Later spot-credit and Zong mobile-payments units).
PayPal’s so-called take rate, or the percentage of the sale it collects as revenue, dipped 10 basis points to 3.77%, a decline attributed to currency hedging and a larger proportion of volume from big merchants, which command lower fees. This dropped PayPal’s transaction margin—the percentage left after expenses and fraud losses—to 64.4% from 65.6%.
Bill Me Later, which is included in the PayPal wallet, saw its dollar volume jump 31% to $849 million. But net chargeoffs, which climbed steadily in 2012, came in at 5.3%, flat with the fourth quarter and up from 4.5% a year ago.
