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Summary:

PayPal has been down on near field communication for payments, saying it was avoiding NFC because it needs at least three to five years to get traction. But the company is softening its stance as it prepares to pitch retailers on its vision for in-store payments.

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PayPal has been pretty down on near field communication (NFC) for payments, saying that while it’s a promising technology, it was avoiding NFC because it needs at least three to five years to get traction and requires a big investment in hardware by merchants. But the company is softening its stance as it prepares to pitch retailers on its vision for in-store mobile payments.

PayPal on Thursday is opening up a bright and festive showroom in downtown New York to sell retailers on its take on how mobile in-store payments will evolve in the coming year. It’s offering a number of stations that show how PayPal will enable multi-channel payments by its users in-store and on their mobile devices. We’ve written about PayPal’s expanding vision of mobile payments and the company showed off its suite of merchant tools at its recent X.commerce Innovate conference.

But one new difference from earlier demonstrations is that the point-of-sale showcase in New York now includes a “tap phone” option for NFC contactless payments that can be triggered through a tap of the phone. PayPal isn’t committing to using NFC for payments yet, but it included it to show that it is prepared to enable those payments when the demand arrives.

“If NFC gets to the point where retailers are adopting it at the point of sale and consumers are showing a propensity for using it, we will enable it, but we are not depending on it, ” said Sam Shrauger, vice president of Global Product and Design at PayPal. “There’s no time frame for NFC, it just depends on the way the market moves. It could be next year or in five years.”

PayPal has NFC experience

It’s not like PayPal has no experience with NFC. It enabled NFC payments in July for peer-to-peer money transfers between Android devices. But it said at the time that it was only using NFC for person-to-person payments. At GigaOM’s Mobilize conference, Laura Chambers, senior director of PayPal Mobile, called NFC a “great technology” but one that needed to mature first before PayPal would use it. Chambers said PayPal was pushing its own solution that didn’t require merchants to buy any new NFC hardware.

“We found that it’s important to have a solution that is broad and flexible,” Chambers said at the conference, adding that “trying to push something new on to (merchants) was not going to work.”

Now, PayPal is still not committing to NFC and this might just be some marketing maneuvering. But it’s demonstrating that while it’s building up a comprehensive solution for merchants, it’s also showing that it’ll be prepared to go with NFC when the need is there. It’s not a bad idea for PayPal, which is trying to sell itself as a complete one-stop shop for merchants. It’s unlikely that NFC payments will gain huge adoption by next year but PayPal can say that it will be there whenever that day comes. Until then, it’s preparing all the tools retailers need now. PayPal’s in-store tools are not scheduled to hit stores in the first half of next year.

PayPal is now in the process of explaining to retailers why its approach stands out in an increasingly crowded field of options that includes Square, digital wallets from major credit cards and emerging NFC solutions from Google and the cell phone carriers. The New York showroom opens for appointment-only visits on Thursday and runs through February. Later this quarter, PayPal is set to start testing its in-store tools with a unnamed major retailer.

Building a multi-channel payment service

PayPal’s system revolves around a new PayPal mobile app that will serve as an expanded digital wallet good at all kinds of physical retail shops. The benefits of the app is that users can connect their credit and debit cards into it, in addition to carrying a PayPal balance. They can also connect loyalty cards from participating merchants. If a consumer opts in for alerts from a merchant, they can get push notifications for deals when they’re nearby a location thanks to technology from WHERE. The wallet can hold on to the discount and apply it at check-out or, in some cases, consumers will be able to purchase a product right from the aisle and have the item shipped to them. One cool feature of the app is that it allows users five days and sometimes up to 30 days to change their funding options after a transaction, so they can choose instead to spread out a payment between credit and debit cards or pay in installments.

The PayPal app can also record shopping lists and wish lists and will grab and apply relevant offers from participating merchants for those items. Users will be able to take a picture of gift cards to load their value on to the PayPal wallet. And in some cases, when a user receives a push notification from a merchant, they may have the option of buying it immediately and walking in to pick up their purchase. At check-out, users will be able to pay by swiping a physical PayPal card, that can be loaded up with multiple funding sources and loyalty cards or they can pay by entering in their phone number and PIN.

Flexible tools for merchants and consumers

Shrauger said PayPal is working on providing a flexible set of tools that helps retailers optimize sales as they incorporate online, offline and mobile payments. It’s also selling its 100 million-strong user base, a sizable audience that is already familiar with payments through PayPal. And PayPal isn’t forcing any merchants to buy new hardware and is instead using existing channels to facilitate sales.

Ultimately, it’s about providing all the tools that retailers and consumers want and letting them gravitate to the ones that makes sense to them, whether it’s NFC or any other options, Schrauger said.

“We want to give customers a way to pay however they want to pay,” Shrauger said.

  1. PayPal is taking a strong approach. Better to make sure consumers get what they want without putting the burden on everyone in the ecosystem.

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  2. This is only half about the NFC adoption and equally as much as their crap ability to integrate platforms into the horrid paypal ecosystem. Oh and by the way, developers using the paypal platform to build mobile apps, you can expect zero support and endless troubleshooting! Have fun!

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  3. Philip Charles Cohen Wednesday, November 2, 2011

    “Most folks on Wall St. view eBay really as Pay-Pal plus a marketplace …”
    http://ebaystrategies.blogs.com/ebay_strategies/2011/10/could-ebays-worst-nightmare-be-happening-soon-.html#disqus_thread

    An astute observation, but John Donahoe and Scott Thompson are simply delusional if they think that PreyPal can continue to underpin the faltering eBay Marketplace “house of cards” by becoming even a minor threat to the existing banks/Visa/MasterCard payments systems at traditional Point-of-Sale—the idea is pure science fiction. (“Beam me up Scotty!”)

    The real question is, when are the world’s various banking regulators going to finally do something about over-sighting this unethical, unprofessional, unregulated and clunky financial operator that offers unlicensed banking-type services and is, in effect, simply a money gouging arm of the Ho’s “eBafia”?

    Even though PreyPal clearly offers banking-type services (ie, holding users’ funds in non-prudentially regulated and non-FDIC insured banking-type accounts, etc), PreyPal is mostly registered in some places not as a bank nor as a provider of credit but only as a “money transmitter” (like Western Union), and indeed PreyPal itself has even claimed that they “are not a payment network”, and there is a grain of truth in that claim because most (but not all) of their activities facilitate the transmission of funds simply by riding on the back of the banks’ existing payments processing systems.

    In fact, the only thing creative about PreyPal has been their founding use of users’ unique email addresses as identifiers for online payment transactions. PreyPal is otherwise no more than a blood-sucking parasite riding on the back of, and in the main cannot function except via, Visa/MasterCard and the banks’ existing payments processing systems.

    Regardless, outside of PreyPal’s mandated use on whatever will ultimately be left of the Donahoe-stagnated* eBay Marketplace, PreyPal (and most other third-party payments processors) will eventually be consigned to the history books by the retail banks/Visa/MasterCard once those players get their “online” act together. There is nothing surer than the sun will rise in the morning.

    Both eBay and its ugly daughter PreyPal are most devious, unethical, unprofessional organisations: they both have become the most despised commercial entities on the planet—apparently, more hated by many than even “the banks”. eBay, amongst many other things, has forever knowingly and criminally, facilitated shill bidding fraud on their trusting auction buyers. And what else can be said about PreyPal that a great many PreyPal merchants don’t already know, to their cost …

    Having said that, it’s possible that PreyPal can survive by becoming the merchant account provider “of last resort” for those very small or unscrupulous merchants unable to get a real merchant account from their own bank—Oh, hang on, hasn’t PreyPal always been just that, and charged all their users accordingly?

    * See http://eventhorizon1984.wordpress.com/2011/10/20/ebay-inc-2011-third-quarter-earnings-call-numbers-of-interest-to-small-business-sellers/

    PreyPal Claims that PreyPal Is Not a Payments Processor!
    http://forums.auctionbytes.com/vbulletin/showthread.php?t=24148

    eBay, a Knowing Criminal Facilitator of Auction Shill Bidding Fraud: Case Study #4:
    http://forums.auctionbytes.com/vbulletin/showthread.php?t=23540

    And, from along the way, a compilation of (mostly inane) quotes from eBay executives:
    http://forums.auctionbytes.com/vbulletin/showthread.php?t=24159

    Enron / eBay / PayPal / Donahoe: Dead Men Walking.

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