PayPal Inc. intends to provide its payment options everywhere - online, in the mobile arena and, now, offline. PayPal President David Marcus and PayPal Vice President of Retail and Prepaid David Kingsborough made this clear during a May 24, 2012, press event at company headquarters in San Jose, Calif., where they indicated PayPal is nearing critical mass in the payments space.
The company now has agreements with all three major POS terminal manufacturers and four new POS software vendors to integrate PayPal payment software on their terminals and in their software. The agreements give PayPal access to 40 million terminals globally, making it a nearly universal option for customers of large and midsize brick-and-mortar retailers, PayPal noted.
PayPal heralded new partnerships with terminal manufacturers VeriFone Inc. and Equinox Payments LLC, respectively the number one and number three terminal manufacturers in the world. These payment hardware providers agreed to include the entire PayPal payment suite on their consumer-facing terminals. PayPal already has a similar agreement with the world's number two terminal manufacturer Ingenico SA.
Consumers will be able to choose any of the PayPal payment options at retailers offering the service on their POS terminals - PayPal card and PIN, phone number and PIN, or, in the near future, near field communication (NFC) and PIN.
PayPal also touted new agreements with four POS software providers: Leapset Inc., a POS system for restaurants that allows customers to order, check in, earn rewards and pay - all before arriving at the restaurant; ShopKeep.com Inc., a software-as-a-service (SaaS) for the Apple Inc. Mac and iPad POS systems; Vend Ltd., an online POS and inventory management software provider; and Erply, a SaaS POS provider. These companies collectively offer access to 50,000 mid-market offline businesses using their software. PayPal additionally stated 15 new national retailers will install its payment software on their POS terminals.
Marcus said retailers can adopt the PayPal solution without ripping out and replacing their current POS hardware, installing NFC devices or instituting terminal upgrades. He noted PayPal calculates that the potential for the offline market is 17 times greater than its online business and added that the company projects it will process more than $7 billion in mobile payment volume this year, not including its new offline processing business. "We are approaching ubiquity," Kingsborough said. "We will be everywhere the consumer wants to be."
Dwaine Kimmet, Treasurer and Vice President of Financial Services for PayPal partner The Home Depot U.S.A. Inc., said at the press conference that he believes PayPal is driving electronic wallet acceptance. "There is not another retail solution out there that keeps the customer at the forefront," he said, adding that PayPal provides the potential for adoption and ubiquity that NFC technology does not because "there is no standard for NFC at the moment."
Rick Oglesby, a Senior Analyst with the business technology research and advisory firm Aite Group LLC, said PayPal's move into the brick-and-mortar merchant realm represents "a big opportunity for the acquiring space." He told The Green Sheet PayPal's decision to focus on cloud-based POS providers that can turn on multiple markets at a time is a "no-brainer strategy" that makes inroads into a new and growing segment of the payments market.
However, he pointed out PayPal remains less a payment network than a payment brand, and in the background, PayPal is still using the traditional card brand payment rails.
Oglesby said PayPal's big challenge is to activate the 40 million terminals to which the POS manufacturing partnerships give it access. He believes many of those terminals aren't compatible with PayPal's software solution and, therefore, represent a hands-on opportunity for merchant level salespeople. Terminals and software need support at the local level with setups and upgrades. "They are going to need ISOs," he said. "Turning things on at the VeriFone level isn't going to get them where they want to go."
According to Oglesby, PayPal's enablement of "a variety of dynamic consumer solutions and back-end solutions" in which acquirers will play a big part is potentially another benefit for merchant services providers. For instance, the PayPal Media Network offers traditional, brick-and-mortar retailers behavioral, demographic, location and contextual targeting to support local advertising, loyalty and coupon programs.
The merchant pays for this service as potential customers "click" on offers. "It should mean a lot to merchants if a retailer only pays when they get a reaction," Oglesby said.
PayPal still has a "tough road ahead" to adoption, Oglesby said, adding that merchant adoption is only part of the equation for PayPal. For PayPal's reach into the offline merchant realm to be successful, consumers still have to adopt the PayPal payment system.
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