Tuesday, January 24, 2012
The companies said the cloud-based, Internet protocol-enabled solution involves a POS application programming interface that allows AJB retailers to offer customers the ability to pay with a PayPal payment card or by using PayPal's Empty Hands solution, where users enter mobile phone numbers and PINs at the POS, with no new infrastructure costs or technology upgrades required by merchants.
AJB said it is building a PayPal interface into its payment solutions platform, Retail Transaction Switch. AJB hasn't disclosed which retailers will be offering the service, but it boasts a customer base that includes "25 of North America's top 100 companies by 2006 sales volume" and "nine of the world's fastest growing merchants." AJB serves customers in the U.K., Europe, Latin America and Asia as well as North America.
The AJB-PayPal rollout will be operational by the end of the current fiscal quarter, confirmed an AJB spokeswoman.
The idea that consumers will have the opportunity to use the PayPal solution at some of the largest U.S. retailers that operate in a variety of retail environments, including clothing, department stores, electronics stores, oil and gas, restaurants, sporting goods and toy stores, means PayPal will have the opportunity to reach what payments consultant Paul Martaus calls critical mass.
"Critical mass in this context means when there is enough buzz, knowledge and awareness on the part of consumers that the technology has the opportunity to go from curiosity to adoption," said Martaus, President of Martaus & Associates. "The test I've applied over 30 years of watching transaction technology in this business is the 'better, faster, cheaper test.' If you have two out of the three, if something provides the consumer with a better, faster and/or cheaper service, it is likely to be adopted."
The question is whether PayPal meets this test, according to Martaus. But the partnership looks promising from his viewpoint. He said, "250,000 terminals may not be a lot of terminals when you consider there are 6 million terminals out there, but these are tier-one merchants and tier-one merchants provide 90 plus percent of all transactions submitted for closure."
Martaus pointed out that less than 4 percent of retailers currently have installed NFC readers at the POS. He believes the push to introduce NFC and EMV in the United States will not curb PayPal's inroads into the retail payments market because PayPal doesn't require that technology to offer retailers proximity payments. Additionally, PayPal's popularity continues to grow. In its recent quarterly report, eBay said PayPal is adding accounts at a rate of 1 million per month.
In September 2011, before Scott Thompson resigned as president at PayPal to join Yahoo! Inc. as Chief Executive Officer, he remarked in a PayPal blog, "Let's be clear about something – we're not just shoving a credit card on a phone. PayPal is re-imagining money and making it work better for merchants and consumers – whatever device you're on, wherever you are in the world, and however you prefer to pay (whether that's cash, credit or installments)."
Thompson said PayPal's goal is to allow customers not to have to stand in line to make purchases. PayPal technology also offers consumers the ability to decide how they want to pay, arrange for payment installments instantly if needed, use any smart device to make payments, and it gives customers the ability to change how they pay even after they've checked out.
Recently, PayPal entered a pilot with Home Depot U.S.A. Inc. to test PayPal's new service. Russ Jones, a Partner with Silicon Valley payments consulting and research firm Glenbrook Partners LLC, tried the solution at a Home Depot store.
Jones summed up his experience in a Glenbrook blog published Jan. 20, 2012. "I felt that paying without having to take anything out of my wallet was nice, and I liked it in a subtle but pleasing way," he wrote. "Now that I think about [it], I don't know why anybody would want a PayPal card if they can use PayPal Empty Hands. … I'm pretty sure that I'll be using PayPal for every one of my purchases going forward at Home Depot."
Karen Webster, CEO of technology consulting firm Market Platform Dynamics, wrote in the January 2012 issue of The Lydian Payments Journal that the biggest hurdle PayPal faces is merchant penetration. However, she said PayPal still drove $56 billion in retail payments in 2010. Webster concluded that PayPal's solution is a "versatile approach to solving POS acceptance for consumers and merchants, leveraging what consumers and merchants have available to use today, including 100 million (and growing) populated wallets.
"Their solutions are also handset and carrier agnostic, which is a big plus. There are already too many moving parts in the mobile payments space to orchestrate. Eliminating this one is pretty huge." 
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