Receive the latest articles for free. Click here to get the Mobile Commerce Daily newsletters.

Is PayPal’s mobile payments strategy stalling out?

July 19, 2013

PayPal looks for bigger offline presence

Mobile is one of eBay’s bright spots these days, but the company’s strength here was not enough to offset weakness in its core marketplace business during the second quarter.

EBay’s stock was downgraded yesterday to a hold after the company reported weakness in Europe and Korea in its second-quarter results this week. While PayPal put in a good performance, this year’s growth in mobile payments has been slower than expected across the industry and could be adding to concerns about the company’s growth in the second half.

“There is an oft-quoted line in technology that many are over optimistic in the short term and overly pessimistic about the long term,” said Gary Schwartz, Toronto-based author of “The Impulse Economy” and “Fast Shopper, Slow Store.”

“PayPal is in a very exciting position to hold the payment credentials for both the physical and cloud purchases,” he said. “Paypal correctly optimized their mobile log-in to leverage the consumer’s unique mobile number for one-click payment and is well-positioned for the long haul as mobile becomes an increasing important part of immersive and more importantly impulse checkout.

“On June 29, 2011 PayPal predicted the end of the wallet by 2015. This was the over-optimistic short term phase. In the long term, they will be a significant player in the digital wallet.”

Mobile payments slow
EBay did not provide a lot of detail about mobile volume during the second quarter, but insisted growth here is what is helping to drive results for both eBay and PayPal.

In the second quarter, eBay marketplace revenues grew 10 percent, compared with 13 percent in the first quarter, while PayPal’s revenues were up 20 percent, compared with 18 percent in the first quarter.

Overall, revenues were up 14 percent for a total of $3.9 billion.

There is widespread agreement that mobile payments are poised to play a significant role in how consumers pay for purchases.

PayPal's iPhone app

With Google, the major wireless carriers, large retailers, banks, credit card networks and others all made big moves over the past year to take advantage of this potential growth. There was significant anticipation that 2013 would be the year that mobile payments really took off.

However, merchants and consumers have been slow to adopt mobile payments so far for a variety of reasons, including that availability is limited, there are no clear-cut leaders and the user experience so far does not provide a significant advantage over current payment methods.

“Mobile payments appear to move in fits and starts, and we definitely seem to be in a slow period right now,” said Nikki Baird, Denver-based managing partner at RSR Research.

“I think retailers in the U.S. are also slowing their efforts because they’re trying to figure out what the impact of EMV adoption will be – they have a deadline of October 2015,” she said.

“Any mobile payment scheme of the future is going to have to take that into account too, and I think that’s contributing to the current lull.”

Going offline
PayPal has been one of the most successful players in the mobile payments space to date, and expects to do $20 billion in mobile payments volume this year.

A key part of its strategy is leveraging mobile to bring PayPal’s online presence into the offline world of commerce, whether it is in a large retail store, a restaurant or a taxi.

For example, in Australia and Britain, PayPal is being used as a way to pay via a mobile device in over 2,000 cafes and restaurants as well as in some cinemas, taxis and other places.

Additionally, Radio Shack went live in the second quarter with PayPal’s point-of-sale options.

PayPal also reported that it signed agreements with more than 50 merchants to facilitate use of PayPal over the Discover network during the second quarter.

“PayPal is trying to get into the bricks-and-mortar world, but it is going to take some time for them to build relationships even with the Discover network,” said Jeff Green, director of the emerging technologies advisory service at Mercator Advisory Group, Maynard, MA.

“Even then they are using cards as an interim step,” he said. “They understand that mobile is going to take some time to develop.”

Adding value
The alternative payment service’s total payment volume grew 24 percent in the second quarter to reach $43 billion, driven by an increase in both the number of transactions and payment volume. PayPal currently has 132 million digital wallets in the cloud.

EBay is also seeing results in mobile. In the second quarter, eBay mobile attracted two million new users and drove an average of 5.6 million listings per week through eBay sellers.

Marketplaces had revenues totaling $2 billion, up 10 percent.

“Forrester has been consistent in saying that adoption of mobile payments will take time – we won’t see accelerated consumer adoption until 2015,” said Denée Carrington, a senior analyst at Forrester Research, Cambridge, MA.

“As PayPal and other continue to innovate in the space, we expect to see mobile payments become more convenient and more compelling by adding value to the commerce experience in a way that swiping with a card cannot,” she said.

Final Take
Chantal Tode is associate editor on Mobile Commerce Daily, New York

Share on FacebookShare on LinkedInShare on Twitter

Like this article? Sign up for a free subscription to Mobile Commerce Daily's must-read newsletters. Click here!

Tags: , , , , , , , , , , , ,

You can leave a response, or trackback from your own site.

Leave a Reply