PayPal is buying Paydiant, a startup that provides the mobile payments and loyalty technology used by many big-name retailers use in their apps, for an undisclosed amount. PayPal also announced on Monday that it plans to start selling a near-field communications (NFC)-enabled version of its Here credit card reader, which will allow its merchants to start processing Apple Pay, Google Wallet and contactless card transactions.
Paydiant is the behind-the-scenes technology used by companies like Subway and Capital One to put payment options, loyalty programs and digital coupons into their apps. But its biggest customer is MCX, a consortium of big retailers including [company]Walmart[/company], [company]Target[/company], [company]Sear[/company]s, [company]Wendy’s[/company], [company]Exxon[/company] and [company]CVS[/company] that is launching its own digital wallet called CurrenC. You’ve probably MCX’s name pop up in the news lately as its members have butted heads with Apple for turning off NFC at their registers, effectively blocking Apple Pay for some of the biggest retail stores in the country.
At Mobile World Congress in Barcelona, I spoke briefly with PayPal’s senior director of global initiatives Anuj Nayar, who said Paydiant gives the payments giant another set of commerce tools to offer its merchants customers. While Paydiant focused on larger retailers, PayPal will be able to scale its products down to its vast network of small retailers. “We can create a digital loyalty program for the corner coffee shop,” Nayar said.
PayPal’s new NFC reader will be similar to the stand-alone point-of-sale terminal it launched in the U.K. two years ago. It has a numeric keypad with a slot for Chip-and-PIN card transactions and a Bluetooth radio to connect to a smartphone or tablet where PayPal’s Here app processes the transaction. The addition of NFC means it will accept contactless transactions from mobile wallets like [company]Apple[/company] Pay, [company]Google[/company] Wallet and eventually Samsung Pay (PayPal’s own mobile wallet doesn’t use NFC). It will also take payments from contactless credit cards popular in many countries outside the U.S., which is why PayPal first will roll out the terminal in the U.K. and Australia this summer and then launch in the U.S. later this year, Nayar said.
When it does come to the U.S., the reader will pull double duty as PayPal’s next-generation credit card reader. This year, retailers are beginning the transition to EMV cards, which use smart chips instead of magnetic stripes to transmit encrypted data at payment terminals. The familiar triangular PayPal Here reader in the U.S. accepts magnetic stripe transactions only, and I assume it will be gradually be phased out as more merchants move over to EMV payments.