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PayPal’s pitch to small businesses is more than just a card reader

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Paypal's VP of mobile, David Marcus

Today was PayPal’s (s ebay) chance to share with the world that it could provide some serious competition to the startup payment processor Square, with its own mobile-centric dongle for accepting credit card payments on the go.

We already knew the rough details of what it was announcing: that PayPal would come to market with a portable card reader for accepting credit card payments on the go. Today’s press conference was all about showing how PayPal, late to the game in some respects, would beat Square, the smaller but more nimble startup in the mobile payments space.

Did it succeed?

A lot of PayPal’s messaging was about its existing dominance in the merchant services business and in mobile payments. Prior to the start of the press conference, the company replayed an impressive array of stats over and over before the media audience. For instance:

  • PayPal hit $4 billion in payments on mobile devices in 2011
  • PayPal is expected to beat $7 billion in mobile payments in 2012.
  • PayPal had more than 17 million active mobile users, compared to 8 million in June.
  • Merchant services total payment volume was $22 billion in the fourth quarter 2011, up 29 percent year-over-year
  • Its merchant services accounted for 66 percent of PayPal’s total payment volume, with $77 billion precessed in 2011. That’s up 36 percent year-over-year.
  • PayPal adds more than 1 million consumers a month, with more than 100 million accounts worldwide.

But move past the numbers and the highlight of the presentation was the card reader and availability of mobile apps — one for businesses and one for consumers — that are designed to allow PayPal merchants to get payment for objects and service online and offline.

The card reader itself is about what you’d expect: It has a triangle shape (in contrast to the Square reader), and allows merchants to swipe and get payments immediately. But where PayPal’s pitch shines is in its ability to allow PayPal Here merchants to accept payments for goods whether the sale happens in person or from online inventory. Frankly, that gives a lot of flexibility that Square can’t offer today.

The PayPal Here app also looks pretty slick, and allows for transactions beyond just swiping a credit card. It also allows them to take a picture and scan a credit card when the reader isn’t available thanks to, or scan a check and receive instant credit. And finally, merchants can also keep track of cash transactions. They can charge instantly using the “Simple” interface, or can create an inventory of products and services to add to a transaction, and even send an invoice to customers.

Merchants will be charged a flat 2.7 percent fee for all transactions, which is slightly lower than Square’s 2.75 percent. But it’s trying to sweeten the deal for merchants by offering instant access to all funds and a debit card that will enable merchants to take cash out. Also, that debit card will offer 1 percent cash back on all purchases, which PayPal says can bring the effective rate to 1.7 percent for those who use PayPal’s merchant service and debit card.

Finally, PayPal is releasing an updated consumer app that will allow users to know where local PayPal merchants using the app and card reader are available. Through the app, users will be able to notify merchants that they’re on their way.

But will this all resonate with its merchants, and with users? PayPal is hoping to draw on the more than 100 million users worldwide it has registered, and said it will be aggressively pushing updates to the consumer app, as well as making thousands of PayPal Here readers available to merchants. The service starts today with select merchants in the US, Hong Kong, Canada and Australia and will expand soon to other countries.

11 Responses to “PayPal’s pitch to small businesses is more than just a card reader”

  1. I think I’m going to have to spread the love and keep my shop’s online transactions via Paypal and offer the Square card reader for when I have my booth at an arts and crafts fair. I just do not want all of my money tied up in Paypal. I hope Square answers by lowering the merchant fee!

  2. Mukesh Aggarwal

    paypal would have to pay ME money to use their system since existing credit card system works for me and is very convenient for me. no reason for me to switch to more risky system.

  3. Philip Charles Cohen

    Square has absolutely nothing to worry about, the clunky PreyPal could not hit the side of an old timber barn, let alone a B&M one. Next time you drop into Home Depot, ask the check-out chick if anyone has yet used (the wholly eBay-funded roll out of) PreyPal to make a POS purchase. PreyPal at B&M POS is little more than an eBay Dept of Spin-created illusion and is undoubtedly a total waste of eBay shareholders’ funds …

    And, just for a laugh, a critique of “The New Way To Pay In-Store” via eBay’s clunky PreyPal:

    PayPal Needs You—Now!

    We know how much you love PayPal and so you are invited to cast a vote for PayPal in “The Consumerist’s” contest for the “Worst Company in America” at:

    eBay / PayPal / Donahoe: Dead Men Walking

  4. Brian Roemmele

    Ryan, Hidden in all of new information is how the PayPal Digital Wallet will benefit small merchants. They have also cloned Square amazing Card Case system with a product they call “Local”. It allows for payment to be made in a very similar fashion to Square’s Card Case. Clearly this announcement is aimed, yes squarely at Square. There are dozens of aspects that have been unnoticed. I took the liberty to clear some of it up with this posting.

  5. A N Other

    Pointless, given that the civilised world outside of N America uses much more advanced ‘CHIP & PIN’ technology. Avoid PayPal like the plague, their business ‘ethics’ are highly questionable.

  6. Frank Tye

    Since it hasn’t been mentioned I am assuming that Paypal is taking the Square route by shipping an unencrypted card reader. Who at Paypal thought that one through. The “most secure payment network” is using the least secure method of colelcting card data?!