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Summary:

PayPal is taking a big step forward with its in-store payment system by partnering with AJB Software Designs, which helps connect the point of sale terminals at many top retailers to payment processors and financial institutions. AJB is in use by 20 percent of top retailers.

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PayPal’s first retail tests of its in-store payment system is happening at Home Depot, the payment company acknowledged last week. But the bigger test will be ensuring that many more retailers and merchants are in a position to easily integrate PayPal’s system as it looks to roll out its offering this year.

PayPal is taking a big step forward by partnering with AJB Software Designs, which helps connect the point of sale terminals at many tier-one retailers to payment processors and financial institutions. AJB is now incorporating PayPal’s mobile payment system into its framework and building out a specific PayPal interface, which will allow PayPal users to pay through 250,000 point-of-sale terminals that connect to AJB software. AJB said it services 20 percent of the top retailers in North America. The AJB integration should be become available to retailers in the first quarter of this year.

Retailers will still have to decide if they want to enable payments via PayPal. And the process of outfitting stores and chains can take anywhere from days to weeks. But if they choose to make the software upgrade, retailers will be able to receive payments via a PayPal Access Card or through an “empty hand” payment in which a user accesses their PayPal account by entering in their phone number at a point of sale terminal. In both cases, they will need to confirm a transaction with a PIN code and then AJB’s software takes the request and pings PayPal, which authenticates the user. PayPal can send back coupon information or deals stored on a user’s PayPal app, which the user can then decide to apply before selecting their payment form and checking out. After the transaction, users will receive an e-receipt on their PayPal app and online in the PayPal account.

Pat Polillo, vice president of sales and support for AJB, told me it’s unclear how many of AJB’s more than 140 major retailers will sign on with PayPal’s system when it becomes available later this year. But he said it’s an appealing option for retailers who don’t have to upgrade their point-of-sale hardware to accept payments from PayPal’s mobile payment system. He said five retailers have already asked if AJB will be working to support PayPal’s system.

“What’s nice about PayPal’s solution is it doesn’t require NFC hardware. That’s how you can envision that retailers would say it makes sense, because it uses the infrastructure already in their stores,” Polillo said.

PayPal plans to strike similar agreements with other payment ecosystems, PayPal spokesman Anuj Nayar told TechCrunch earlier this week.  Nayar told me recently that PayPal’s in-store payment system will roll out over the next 12 to 24 months. This is the beauty of PayPal’s approach because it doesn’t require consumers or merchants to have NFC devices, which is something PayPal has harped on a number of times. And if PayPal can do a good selling job on retailers, it has a pretty quick path toward a broad deployment.

But getting in stores is just the first step for PayPal. It has to show more value for merchants. As I wrote recently, PayPal is looking to leverage location-based offers to help drive traffic to retailers and encourage users to pay via PayPal, which can close the redemption loop and help show retailers the efficacy of using PayPal. But there needs to more ways for merchants and retailers to connect to consumers. Being able to establish a user’s presence inside a store will allow a merchant to send them offers and discounts. PayPal has shown off how it hopes to help merchants do this by encouraging users to scan QR codes when they enter a store for a coupon. And it is planning to let consumers scan items to check for inventory or purchase products directly from a store aisle and have it shipped home.

All of these other added elements are going to be necessary for PayPal to sell its system to merchants, who need more than just another payment system. Those elements will come in time but for now, PayPal is laying the ground work to be in a lot of stores later this year.

  1. Drewry News Network Wednesday, January 11, 2012

    http://www.DrewryNewsNetwork.com

    you have to give it to PayPal. They are innovative and know how to stay on top of their marketing game! :-)

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  2. I understand the desire for retailers to look cheaper payment options than the current monopoly of Visa-MC-AMEX, and with Paypal acting similar to a Debit Card with direct deduction from a checking account they should be able to be very price competitive for the retailers. The part I don’t see so clearly, is what is the compelling reason for consumers to adopt this new payment method? It’s no easier than a debit card, and to the consumer the cost is same (both options require a checking account, so even that fee is common to both models). Might Paypals thinking be that they use lower processing costs to get into the retailers, and then wait for NFC to providing a driver for consumer adoption? It solves the chicken and egg problem.

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