PayPal’s Foray into TV Commerce Could Help Recruit Merchants for POS Processing

PayPal Inc.’s latest effort to enter the nascent business of processing transactions for merchandise shown on television—so-called T-commerce—could also help recruit more merchants for the San Jose, Calif.-based company’s point-of-sale payment service, a PayPal executive tells Digital Transactions News.

As it turns out, merchants that agree to accept PayPal at their cash registers and also run TV commercials for which PayPal is processing payments will be able to download coupons to the digital wallets of PayPal users who are watching those commercials and agree to receive the offers, says Scott Dunlap, vice president of emerging opportunities at PayPal. The digital coupons will then be applied automatically the next time the consumer shops at the participating store. “It’s still the case that television is the number-one point of [product] discovery,” Dunlap says.

PayPal announced this week it is planning to introduce a T-commerce service with both cable operator Comcast Corp. and TV services provider TiVo Inc. Through the service, consumers watching commercials specially designed for interactivity will be able to order merchandise being advertised and pay for it with their PayPal accounts, using either a mobile device or TV remote control. PayPal’s goal is to bring the service live by the end of the year, Dunlap says. Transaction pricing to the merchant will be the same as PayPal’s e-commerce rates, which range from 2.2% plus 30 cents up to 2.9% plus 30 cents, depending on volume.

Meanwhile, PayPal recently announced that some 15 retail chains have agreed to accept PayPal in their stores, including Abercrombie & Fitch, Barnes & Noble, JCPenney, Office Depot, and Toys ‘R’ Us. At least five more chains are expected to agree to take PayPal before the end of the year, PayPal officials have said. Early this year, The Home Depot Inc. began accepting PayPal at all of its 2,000 U.S. stores. Consumers use PayPal in these stores either by entering their mobile number and PIN at the POS terminal or by swiping a special PayPal card and entering a PIN.

If PayPal meets its year-end goal for bringing the T-commerce service live, it will soon have what could be a powerful inducement for more retailers to open their stores to the processor’s payment service. “We have a plan to get it done by the end of the year, but it’s not a hard commitment,” Dunlap says. “We have figured out the technology, and now coordinating with advertisers will determine when.” This coordination, he adds, is largely out of PayPal’s hands and rests with its partners, Philadelphia-based Comcast and Alviso, Calif.-based TiVo. He says he expects TiVo to go live sooner than Comcast, since it began building out application programming interfaces for the service a year ago. “TiVo is just much more ready,” he says.

PayPal started to explore the potential for processing TV-based transactions when it realized that consumers were, in a rudimentary way, already doing T-commerce. PayPal noticed that its users were doing more transactions on tablets and mobile phones linked to broadband connections in the home, yet at the same time TV watching was not dropping. “We felt a gravitational pull into the living room,” says Dunlap. “We realized the discovery of products is happening on television, so it made sense to bridge [commerce and TV].”

This is not PayPal’s first foray in T-commerce. In late 2010, it said it was working with a Plano, Texas-based TV-technology provider called FourthWall Media to create a so-called buy button that would activate purchases from users’ TV remotes. And earlier, PayPal had struck a deal with San Francisco-based Related Content Database Inc. (RCDb) to process payments for its users. RCDb’s technology synchronizes merchandise shown on TV with relevant eBay auctions on a mobile device, allowing interested consumers to bid on the items. Earlier this year, PayPal parent eBay Inc. introduced “Watch with eBay,” an iPad app that allows users to view lists of products related to programs they’re watching.

Now, though, PayPal says the time may be ripe for T-commerce. In an October 2011 PayPal survey, some 49% of TV subscribers expressed interest in buying goods and services related to TV programming, using either a remote or a mobile device. Almost 30% of these subscribers were willing to use PayPal.

The new service PayPal is working on with Comcast and TiVo may have some static. TiVo, in particular, is noted as a pioneer of digital video recorder (DVR) technology, which allows TV viewers to zip through commercials to continue watching programs. Dunlap says TiVo will feature an interactive ad for those who skip commercials, which viewers can watch at their discretion. “I’ve been very impressed with the interactivity they’ve had with that,” he says. “They’ve really thought this through.”

At the same time, the transaction potential for PayPal may prove hard to pin down. Asked about this, Dunlap says only that “it depends on which MBA you ask.”