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PayPal pilots NFC as transaction volume increases 40pcBy
With PayPal’s mobile payments transactions volume increasing 40 percent year-over-year, the business is testing NFC payments prior to its imminent split from eBay, executives revealed this week during the ecommerce leader’s first quarter earnings call.
Following PayPal’s acquisition of fellow commerce platform Paydiant in March, PayPal is planning to allow bank partners and merchants to integrate more mobile wallet functions into their own applications as part of its technology agnostic approach. Ultimately, PayPal aims to leverage a slew of mobile commerce opportunities in addition to NFC payments, such as QR codes, HCE and Bluetooth.
“It looks to me that they are hedging their bet a bit by getting an NFC solution in place,” said Thad Peterson, senior analyst at Aite Group, Atlanta, GA. “I don’t think it will have a short-term impact on the space, but it does position PayPal to meet customer and merchant needs regardless of how the space evolves.”
EBay is now experiencing mobile payment transactions accounting for nearly 30 percent of overall transactions, with an approximate yearly jump of 40 percent.
Overall, the brand saw revenue rise 4 percent, despite the decline in sales in its marketplace business, down 4 percent from one year ago.
The move to NFC payments suggests that consumers are likely to rely on their mobile devices instead of physical wallets when paying for items in-store in the future.
“I wrote a book four years ago called The Impulse Economy on the evolution of payment channels such as NFC,” said Gary Schwartz, president and CEO of Impact Mobile, New York. “Three years ago, NFC was a solution looking for a problem.
“Today with greater OEM adoption, the question remains on whether we are pushing rope on technology when simpler cloud-based payment solutions may be more optimal.”
The wearables sector is also joining the NFC payments action. American Express card holders in the United States will be able to make purchases using a wearable fitness tracker with an embedded NFC chip starting this summer, pointing to the potential for wearables to transform commerce (see story).
PayPal is employing the notion of being agnostic toward technology at point of sale. However, the company does not aim to stop at easy swipes for payment.
“The elephant in the room remains the point-of-sale and whether we should adopt patch-ware solution for these glorified abacuses or bypass them for the cloud in next-gen checkout,” Mr. Schwartz said. “Proximity cloud-based solutions could allow for intelligent basket management and checkout.”
It seeks to test options that would allow merchants and business owners to better connect with consumers via rewards loyalty as well as other mcommerce-friendly features.
“How can you with that phone tap enable a merchant to get ever closer to their consumers through rewards loyalty, couponing offering and associate that with the payment choice of type a consumer wants to pay with, whether it be a debit card or credit card, private label, Bill Me Later, whatever it may be, that’s what we want to provide,” said Dan Schulman, CEO Elect of PayPal, San Jose, CA.
Keeping options open
PayPal is refraining from placing all of its eggs into one basket by not focusing exclusively on NFC payment solutions, as they only account for two to five percent of point-of-sale terminals available in the current marketplace.
This has caused the company to not bet on a single technology, especially as 2015 brings brands into what Mr. Schulman referred to as one of the financial service industry’s most exciting periods.
PayPal’s split with eBay enables the company to enter into partnerships with other marketplaces while eBay may tap alternative payment providers, a tactic designed to create more flexibility for merchants and consumers alike.
However, PayPal’s previous leading role in mobile payments has been somewhat overshadowed by the success of Apple Pay, an iOS-based mobile payment system that has integrated with many major brands. Its competition with the platform may be a reason for PayPal’s desire to tap NFC solutions as well as rewards loyalty and later billing options.
EBay has also been ramping up on mobile strategy and taking notes from social networking sites’ layout to better appeal to its users. This past December, eBay revamped its iPad application with a photo-heavy design and features similar to social media site Pinterest to bolster sales and dip its toes into product discovery (see story).
“PayPal is about enabling payments for their customers and the more ways that they can do that, the better their value proposition,” Aite Group’s Mr. Peterson said. “It makes sense for them to be open to any form of transaction that helps their customer use PayPal.”
Alex Samuely is an editorial assistant on Mobile Commerce Daily, New York
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