PayPal may be taking a cautious stance on the NFC craze, but it is certainly moving mobile services to the heart of its agenda. The company is to combine its online, offline and mobile units into one division, reflecting the firm’s strategy of creating a broad, end-to-end payments platform spanning all kinds of payments.
The enlarged operation will be run by Hill Ferguson, who has extensive mobile experience, having been at m-payments specialist Zong before joining PayPal (when it acquired Zong) to lead its mobile unit. He then became global head of product last month.
PayPal has already started to unify its user experience, whether customers are paying online or in-store. Last week it unveiled a new design for Paypal.com with a simplified user interface harmonized across device types. Recently it announced PayPal Payments, a service to make it easier for smaller merchants to support online, mobile and store-based transactions.
Simplicity is the watchword for CEO David Marcus, who also came from Zong, which he founded, and was VP of mobile before taking the top job. Indeed, a simplified experience ‘ which will drive usage – is one of the reasons why PayPal has been lukewarm about NFC m-payments, since it argues that customers will more naturally use existing web or SMS techniques, which do not require merchants to commit to new infrastructure. Marcus wrote on a company blog: ‘Mobile is simpler by definition. Starting product designs from mobile will force the elimination of features introducing unneeded complexity.’
The other reason to support a range of services on mobile devices is to provide PayPal with one route into stores, and the 90% of transactions that still take place in physical shops rather than online. In March, the company launched PayPal Here, which aims to take on start-ups like Square and treat the handset as more than a tool for consumers to make payments, becoming a terminal for merchants too. Here consists of two free applications for Android or iOS devices ‘ one for consumers and one for merchants – and a plug-in card reader, dongle-sized and fully encrypted.
End users can send invoices or accept debit and credit cards, US cheques and PayPal transactions. The updated app also notifies consumers of where stores with the newPayPal reader are located, and even notify merchants that they are on their way. Merchants can accept payments by swiping cards in the mini-reader, by scanning plastic or cheques using the handset’s camera, or manually entering details. They can also send invoices and accept PayPal directly from their app or the eBay unit’s mobile website, and the software can keep an inventory of cash transactions.
PayPal aims to undercut new rivals like Square by charging a slightly lower fee ‘ a flat rate of 2.7% for swipes and PayPal transactions ‘ but also by offering instant access to all funds and a debit card that will enable merchants to take cash out, and which will offer a 1% cashback on purchases, lowering the overall fees further. It also boasts greater flexibility than competitors – PayPal Here merchants can accept payments for goods whether the sale happens in person or online.
That, in turn, fits into parent eBay’s ambitious plans to create an end-to-end platform covering all aspects of the value chain across mobile, ecommerce and physical sales. With a string of acquisitions over the past two years, it aims to emulate Visa and build a broad system that will span mobile, online, social and local payments. eBay is calling this system X.Commerce and is setting up a business division dedicated to it. This will create an open platform that support payments and end-to-end services to merchants, connecting them to consumers in an increasingly targeted, and even hyperlocal, way.
Among the acquisitions are Magento, whose open source commerce software platform is one of the most popular systems for merchants to build online storefronts based on easily customizable templates. This will be integrated with PayPal and GSI ‘ a digital ecommerce and marketing firm which eBay also bought ‘ to create the foundations of X.Commerce. Other relevant purchases recently have included RedLaser, Milo, WHERE and Fig Card, which add many aspects of social/local shopping, a key driver of mobile commerce and an area where the web players are ahead of the traditional financial giants. RedLaser specializes in comparison shopping; Milo links customers to a local inventory of products; WHERE added a location-based advertising network plus a local deals service and guides; and Fig Card is a competitor to offline payments start-up Square.
PayPal says it processed $4bn in mobile payments in 2011 and expects to do $7bn this year, and its mobile user base has risen from 8m last June to 17m at the start of this year. Across all platforms, its merchant services handled $22bn of transactions in Q411, up 29% year-on-year, and these revenues now account for two-thirds of PayPal’s revenues, taking it well beyond its roots as a purely end user service.