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Summary:

PayPal isn’t just building out a point-of-sale transaction network. It’s looking to engage consumers well before they set foot in a store. The company says its WHERE location-based ad network will be key in helping merchants attract consumers into their stores with deals and offers.

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As we have been reporting, PayPal is gearing up to launch an in-store payment system that will compete with Google Wallet, Isis, Square and others. But the company isn’t just building out a point-of-sale transaction network. It’s looking to engage consumers well before they set foot in a store.

Walt Doyle, the CEO of WHERE, which was acquired by PayPal last year, said that will be a key battleground in mobile payments, pulling in consumers off the street. WHERE, which operates a location-based ad network, will be used as a way for merchants and retailers to engage consumers with deals and offers and lure them into stores, where they can check out using PayPal’s upcoming payment system. Doyle told me in an interview that the system will make mobile payments interesting to both consumers and merchants.

“If you only enforce payments without content advertising or offers, it’s simply not compelling from the acceptance side or from the consumer side,” Doyle said.

WHERE is able to target consumers based on a variety of factors including location but also search and purchase data. The goal is to be able to find nearby users and walk them into a store so they will buy a product based on an offer or deal. That will allow PayPal to close the redemption loop and show merchants how much business they are getting from PayPal, Doyle said.

We talked about the potential of offering local deals when PayPal bought WHERE. But it is interesting to see that PayPal considers WHERE a key tool in its larger mobile payments efforts. It’s not surprising, considering Google Wallet is being combined with Google Offers, but it shows that this is becoming table stakes in mobile payments. You can’t just have a great payment solution; you also need to have marketing and outreach tools to distinguish yourself from other offerings. And you need to provide merchants with more benefits than just an alternative to a card swipe. Having a way for merchants and retailers to grab people off the street is going to be key for successful payment systems. And putting coupons and deals in the hands of consumers can help convince them that it makes sense to use an alternative to credit cards or cash.

One of the problems I see, however, is that with WHERE there is no guarantee that consumers must pay via PayPal at the point of sale. A user could receive a mobile ad for a deal or coupon and then choose to pay with cash or a card, which would leave the redemption loop open. That, Doyle said, is something PayPal will be working on as it rolls out its payment system.

But he said this is part of the bigger challenge for all mobile payment providers. They have to provide more benefit than a card swipe to both consumers and merchants. It is going to take an ecosystem to accelerate adoption, said Doyle, and there is a lot more learning needed in the years to come.

“2012 in mobile payments is where location-based services were, like, three to four years ago. It’s, like, the year when things begin but it’s not where the critical adoption curve kicks in. You need consumer adoption on handsets and merchant adoption on the point of sale side. You will see it begin this year, and we will all learn a ton,” Doyle said.

  1. I think PayPal/Where team have it right – the most value will be realized by influencing intent before the customer is in the store. TheStreet.com just did a great piece on how the largest retail brands are using Xtify to do this: http://yhoo.it/xPeiIJ

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  2. Thanks Josh. And interesting piece on Xtify. I think payments is interesting but there’s all the other stuff merchants want like loyalty, targeted marketing and customer acquisition. A good system will incorporate more than just payments.

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  3. Philip Charles Cohen Tuesday, January 3, 2012

    “PayPal is gearing up to launch an in-store payment system …”

    Dream on Scotty …

    “Study Sees PayPal Adoption Down Among Multi-Channel Merchants

    “Twenty-two percent of EPIS merchants who had accepted PayPal on their own websites and off-eBay stores in October 2010 stopped accepting PayPal as a payment method on those sites in October 2011.

    “There were 19% more merchants who accepted credit cards on their own websites and stores in October 2011 than in October 2010.”

    http://www.auctionbytes.com/cab/abn/y11/m11/i21/s02

    And, Visa is to launch its new online payments gateway “V.me” in 2012. The idea is similar to that offered by PayPal: you upload details of your payment cards to Visa—even if they’re not Visa-branded—and Visa will process the payment—directly with your banker—without revealing your card details to the merchant. No card details are revealed, so the using of this “professional” system will reduce the risk of online credit card fraud on both payers and payees to virtually zero.

    Off-eBay online merchants will be able to free themselves from the most unprofessional, parasitic, unscrupulous and “clunky” PreyPal. And, undoubtedly, PreyPal will then atrophy back to it’s mandated use on the eBafia marketplace only, from whence, without its mandated use thereon, PreyPal would never have had the success that it has had. Unfortunately, there is no relief in sight for on-eBay merchants.

    But, be in no doubt that, except for its mandated use on whatever will be by then left of the Donahoe-atrophied eBay Marketplace, the clunky PreyPal will elsewhere be quickly buried by Visa’s professional online offering, “V.me”, once it is up and running in 2012. Thereafter, as eBay continues to sink lower and lower in the water, so will PreyPal.

    And, as for PreyPal’s projected move into EFTPOS at B&M. Pure science fiction—“Beam me up Scotty [Thompson]”.

    Then, there is that other little problem of corporate image: eBay and PreyPal have become the two most despised commercial entities on the planet.

    So, no more underpinning of eBay’s sagging bottom line by the clunky PreyPal. What is the “eBafia Don” do now? Maybe, if Mittless Romney wins the GOP nomination we can hope that he will pick as his running mate his fellow “Pain from Bain”, the headless turkey, John Donahoe. Donahoe’s nearing the completion of his destruction of the eBay marketplace and so he should soon be looking for an even bigger challenge.

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

    eBay / PayPal / Donahoe: Dead Men Walking.

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    1. LOL – If you think Visa is going to be doing merchants a favor, then you are the one living in a dream world. Visa and its ilk have been sticking it to both consumers and merchants for years – or maybe you have been living under a rock. V.me, ISIS, and their ilk have one thing in common – a “solution” created by companies that have been continually sticking it to consumers and merchants alike. As a PayPal user, I love the service and know that they are on my side.

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      1. Philip Charles Cohen Wednesday, January 4, 2012

        No doubt then, you will be buying many shares in PreyPal when the desperate eBafia finally lauches the PreyPal IPO. … Dream on …

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  4. ” A user could receive a mobile ad for a deal or coupon and then choose to pay with cash or a card, which would leave the redemption loop open. ”

    They could solve this problem easily using bigger discounts for mobile payments.

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  5. Philip Charles Cohen Wednesday, January 4, 2012

    Hang on, what’s this, Scotty Thompson moving to Yahoo

    Well, apparently Scott Thompson is smarter than he looks after all; still he would know the real situation at PreyPal and he undoubtedly recognises that the clunky PreyPal is on the cusp of commencing its journey down the gurgler, and he is jumping off the tired old SS “eBay” before it too goes submarine—that is, always assuming he was not pushed overboard as is often the case on the SS “eBafia”.

    “According to eBay Inc. CEO John Donahoe, PayPal will become bigger than eBay as early as 2 years from now and is behind everything eBay does and every acquisition it makes.”

    Surprise, notwithstanding his obvious delusional mental state, eBay’s chief headless turkey has got that right: undoubtedly PreyPal will be bigger than eBay soon but it won’t be because PreyPal has gotten any more successful, just the opposite—Visa’s V.me will see to that; it will be because the eBay “house of cards” has finally imploded.

    And, who but a total idiot would invest in any PreyPal IPO now?

    Dream on John “Turkey” Donahoe …

    Who then will take charge of PreyPal? Only a fool would take charge of PreyPal now. But the real question is, when is the eBafia Don also going to abandon ship, or be thrown overboard by the owners of the ship when they finally wake up to the fact that all along they have had “Captain Queeg” at the tiller?

    Hang on, as a matter of interest, a fool is indeed taking over at PreyPal …

    “Ebay Boss John Donahoe To Serve PayPal’s Interim President”

    http://techcrunch.com/2012/01/04/paypal-announces-ebay-boss-john-donahoe-to-serve-interim-president/

    eBay / PayPal / Donahoe: Dead Men Walking.

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  6. The thing I like the best about Google Wallet is that, unlike many of its competitors, it would allow users to link all of their cards, regardless of brand (Visa, MasterCard, etc.) to their Google Wallet accounts.

    From a consumer’s point of view, the best mobile wallet would store all of our cards, as well as cash and checks. What we would not want to have is a clutter of apps for each individual card type or even each card issuer. So Google is moving in precisely the right direction and I hope the promised future versions will build on that foundation. http://blog.unibulmerchantservices.com/google-wallet-goes-live-more-consumer-friendly-version-to-follow

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