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PayPal nixes remote check deposit as banks jump onto trendBy
PayPal has pulled the plug on mobile remote check deposit, eliminating a distraction as the company continues to focus on building its digital payments business.
While remote deposit capture has proven to be a popular service with consumers, financial institutions have been slow to roll it out, a void PayPal was looking to fill. However, digital payments are a much more important focus for PayPal, so the company is eliminating remote check depost now that more banks are offering the service.
“PayPal’s remote check deposit feature was likely not a profitable vector for them,” said Nathalie Reinelt, analyst at Aite Group.
“As more and more smaller banks and credit unions add apps that include remote check deposit, that void is slowly being filled by the financial institutions themselves and PayPal doesn’t necessarily need to bridge that gap any longer.”
New dog, old tricks
A survey from RemoteDepositCapture.com and Mitek revealed last month that while consumers love the convenience of mobile remote deposit capture, the service has not been universally adopted by financial institutions due to security concerns. However, 80 percent of financial institutions offering mobile remote deposit capture report no losses and 90 percent say the benefits outweigh risks and costs, a clear signal that the tech will soon be offered universally.
When Paypal debuted the service in 2010, it was joined by very few financial institutions. Much has not changed since and in fact, major banks and credit unions are now just beginning to more widely integrate the tech into their branded apps.
PayPal’s process was simple: endorse your check via account number or email address, enter payment amount into the app, snap a photo of the front and back of the check and then finally upload it.
Not only are mobile deposits convenient, but they have been proven safer than desktop-based methods that use a flatbed scanner. When it comes to malware, computers are also more prone to being attacked versus smartphones.
With all the hype surrounding mobile banking functionalities, part of the reason many banks are lagging with in-app capabilities is because they do not have all of the business intelligence and processes in place to properly attribute by channel what’s happening in their portfolios. This is largely because mobile is still new to them.
According to a new mobile banking report by Forrester Research (see story), banks are beginning to listen to consumer wants and needs and are making considerable strides in mobile that had inadvertently relieved PayPal as a middleman.
Coming to a store near you
In May 2012, fifteen brands including Home Depot, Toys “R” Us, Barnes and Noble and Guitar Center signed with PayPal to allow in-store shoppers to pay for purchases through the third party service.
This brand extension strategy is a natural progression for PayPal, who also partners with point-of-sale software companies to enable small businesses to accept PayPal for purchase payments. More than 50,000 small business merchants have the ability to accept PayPal as a result of these types of piggybacking.
Extending the PayPal brand to physical storefronts is a coup for matriarch eBay. By conveniencing consumers in as many transaction experiences as possible, PayPal has the potential to build deeper loyalty and relationships with users. Futuristically, PayPal could become to the go-to payment method and make the need to carry a wallet obsolete.
If this is PayPal’s game it means a huge step in centralizing brand extension in light of rivals such as Google Wallet, which is too trying to establish ground in the same market. Retailers don’t appear to be showing noticeable preference to either player, but are indeed testing each service’s payment options.
In March, PayPal enacted the expertise of mobile location tracking firm Placed to connect ads served via the PayPal ad network to real-world store visits.
With a user base of 125,000, Placed tracks users shopping habits by GPS and Wi-Fi incentivized by gift cards and other offers. The firm follows up with users to validate location data and surveys them on which stores or restaurants they visited.
Ultimately, PayPal will be able to infer from this information whether someone made a purchase subsequent to being served an ad.
PayPal also acquired mobile ad network Where in 2011, which it has evolved into a location-centric ad network that layers data for easy analyzing of purchases made using PayPal for targeting. Clients using the platform may digest existing customer profiles to determine an aggregated, mean, ideal customer based on patterns of purchases made with PayPal.
PayPal for small businesses
Its aggressive reentry into the payments market means significant changes are under way, especially as PayPal teams up with others to advance its delve in technology.
Well positioned with a IT-focused approach to building digital wallets and acquiring consumer habit data, PayPal will remain at a competitive advantage to Google concerning payments.
“While some consumers benefited from the free check deposit service, I can’t see how it could have provided a large upside for PayPal,” Ms. Reinelt said.
“As they focus their market strategies on more payment related features, such as mobile payments, it makes sense that they would remove services that aren’t enabling that focus.”
Michelle is editorial assistant on Mobile Commerce Daily, New York
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