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$3B in mobile payments for PayPal this year but bigger prize at stake

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PayPal’s (s EBAY) mobile payments business is now expected to do $3 billion in volume this year, double what the company predicted last fall, and up from $2 billion forecasted in April. PayPal said it’s seeing $10 million a day in total mobile payment volume, up from $6 million in March.

That’s a huge ramp-up and suggests PayPal is finding success in facilitating online payments through mobile phones, which is an extension of its existing business. But it doesn’t address where PayPal needs to go in the future: mobile payments for offline goods. Offline, real-world payments are a much bigger opportunity, representing more than 90 percent of current transactions. That’s where PayPal is looking to shift, but right now, the bulk of its business is still online.

PayPal’s mobile payments currently come in two varieties. PayPal offers person-to-person mobile payments, in which it doesn’t make money if users tap a PayPal balance or bank account or charges a percentage fee on transfers from a credit or debit account. It also makes money on mobile commerce payments, where it takes a percentage fee for goods purchased online on a mobile phone via PayPal.

PayPal doesn’t share which type of transaction is fueling the increase in volume. But it appears mobile commerce could be a significant driver here. PayPal said its two-step Mobile Express Checkout has helped companies like electronics retailer Crutchfield, which improved its conversion rate of online mobile transactions by 33.7 percent since implementing the PayPal system. Aided by its growing mobile payments business, PayPal revenues grew 23 percent in the first quarter and hit almost a billion in revenue, making up 39 percent of parent company eBay’s total revenue.

Even with the success PayPal is seeing, the bigger mobile payments challenge awaits. That’s where Google (s GOOG),with its new Wallet offering, Square, Intuit (s intu), mobile carriers, major credit card companies and a gaggle of startups are looking to compete. PayPal is in the process of marshaling its resources to achieve a bigger point of sale presence. That includes weaving together recent acquisitions like WHERE, Milo, RedLaser and Magento to build out a commerce platform called X.commerce that can hit both online and offline.

PayPal has the brand recognition to work well in this area, though as we reported earlier, it has been taking a long time to get its in-store solution ready for the market. If PayPal can put all its pieces together and build a system that appeals to both consumers and merchants, and do so in a time frame that doesn’t leave it late to the party, then $3 billion may just be the start.

3 Responses to “$3B in mobile payments for PayPal this year but bigger prize at stake”

  1. Philip Cohen

    The eBay Dept of Spin can try to support its share price by upping the PayPal estimates all it likes, but …

    eBay, Magento, AliExpress, Skype, Fish, FigCard, GSI Commerce, RedLaser, Where, Milo, Fetch, PayPal, Google, Schmoogle, whatever …

    eBay’s chief headless turkey likes buying toys, none of which have done anything to improve the eBay Marketplace’s bottom line, not even in this the fourth year of this ham-fisted fool’s three-year turnaround plan to change eBay from what made it so successful into, who knows what?

    The fact is the rusting old hulk eBay is presently being kept afloat by the clunky PreyPal so it’s good to see these boys recently squabbling and threats to PreyPal’s online dominance now coming thick and fast. It’s interesting times ahead for all we eBay “haters” (oops, I mean “watchers”). I just hope that someone has remembered to bring the popcorn.

    PayPal is mostly registered in various places not as a “bank” or as a provider of credit but only as a “money transmitter” (like Western Union), and indeed PayPal claims that they are not a “payment network”, and there is a minute degree of truth in that claim because it could, somewhat nonsensically, be claimed that most (but not all) of their operation does no more than facilitate the transmission of money by riding on the back of the banks’ existing payments processing systems.

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

    PayPal, outside of whatever will ultimately be left of the Donahoe-devastated eBay Marketplace, will undoubtedly eventually be consigned to the history books by the retail banks/Visa/Mastercard once those players get their “online” act together.

    Some people may not like “the banks” but all those participating retail banks at least supply a professional payments processing system—unlike PayPal’s—and even PayPal concurs with that assessment: except for its intra PayPal “account” transactions, they use the banks’ payments processing systems all the time and simply could not exist without them.

    Regardless, all the above comments apply equally to all of the other third-party online “payments processors” that are emerging out of the woodwork and wanting to have access to your banking account. Unless they have formal and direct arrangements with all the participating retail banks, as do the likes of Visa/MasterCard, then the result is invariably going to be as potentially problematic as is PayPal’s clunky operation for its merchants—a great many of whom can tell you a sorry tale or two.

    All a merchant needs to know about the clunky PayPal, at:

    What all buyers should know about the criminal activities of eBay, at:

    Is that PayPal’s blood in the water, and are those “sharks”—oops, “banks”—I can see circling?

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