The rapid global spread of smartphones is profoundly transforming the way we purchase goods and services. Credit card companies, banks, smartphone platforms, social media and retail giants are all aggressively entering the fray, enticed by an expected growth of at least 300% over the next four years from today’s already sizable $235 billion market.
PayPal—long tied to its parent, eBay—may be making the boldest moves of all as it aggressively seeks to position its popular online payments service inside apps, stores and even outer space. After dominating online payments, PayPal is now busily remaking itself for a world where apps trump the web and where “online” can extend to any physical location, all thanks to smartphones.
Did they wait too long? Unlikely. However, past results don’t guarantee future success. The mobile payments market is filled with a string of innovative and well-established companies, including Amazon.com, Square, Facebook and long-time heavyweight credit champs like Visa and MasterCard.
A recent report from Business Insider noted that, while mobile transactions account for just 4% of all credit/debit card volumes, such transactions have grown by more than 100% every year for the past five years. In many parts of the world, these numbers are accelerating even faster.
Business Insider defines “mobile transactions” as purchases made within a smartphone app or mobile website. By contrast, they separately define “mobile payments” as a payment from a “mobile, Internet-connected device used to facilitate a transaction that might otherwise have taken place using a physical credit card, check or cash at a store or point-of-sale.”
PayPal wants to be a critical piece of both mobile transactions and mobile payments, as do many other companies that may have even greater built-in advantages. Amazon, for example, recently released its “Pay With Amazon” service. This enables customers to use their Amazon credentials—identity, shipping address and credit card info—on any mobile site or app that offers the “Pay With Amazon” button.
Facebook similarly announced “Autofill with Facebook.” With Autofill—currently in limited roll-out—the social media giant is encouraging its users to entrust them with their credit information. This way, users can instantly complete a purchase via their smartphones simply by allowing Facebook to auto-populate their credit details inside the app.
While still in the early days, such services could potentially be used to provide frictionless payments at stores, restaurants or to friends and other individuals, all via smartphones and tablets. It’s probably not a surprise, then, that PayPal recently acquired Braintree for a substantial $800 million.
Braintree’s solution—including workable APIs and back-end processing—is especially popular with app developers. It enables apps to access a user’s credit card details securely by entering their information just once into Braintree, rather than re-entering the information multiple times across multiple apps.
The combination of Braintree’s technology and PayPal’s scale make it an attractive choice for developers. App developers now have a solution that allows them to quickly tap into a platform that already has more than 100 million credit cards on file.
In-app purchases aren’t the only form of mobile payments PayPal is gunning for. Physical stores are equally ripe for smartphone commerce, and PayPal is moving aggressively on this front. Their latest offering lets smartphone users pay at brick-and-mortar stores using a QR code and the retailer’s existing bar code reader. The user opens their PayPal app, finds the corresponding QR code for their desired purchase, and scans it across the reader.
According to PayPal, this service is expected to launch globally early next year and millions of merchants can use this method as long as they update their existing cash register software—no new equipment necessary. Despite the streamlined setup process, Visa and MasterCard insist that swiping credit cards remains a far easier solution.
They may be right from a procedural standpoint, but they’re glossing over PayPal’s biggest advantage, promotions. PayPal notes that by using its payment code method, retailers can incorporate special offers, coupons, gift cards and reward programs into the transaction in real-time. When customers save money and merchants build loyalty, everybody’s willing to take a few more seconds at the checkout counter.
The combination of smartphones, social media and location-aware apps are enabling new business models and spurring new modes of payment for goods and services, both real and virtual. To its credit, PayPal is not resting on its laurels or even keeping their focus purely on earth-bound payments.
The company recently announced PayPal Galactic, “a visionary partnership with the SETI Institute and others in the scientific community” to enable financial transactions for astronauts and space travelers. Yes, this is for real. No doubt, this was a fun project for the company’s many talented engineers, but it has also garnered the attention of many reputable media outlets.
PayPal appears to have acknowledged that they have been stuck as the payment platform for eBay and Web-based retailers for too long. Those days are over. With about a billion dollars in recent acquisitions, and aggressive moves into all areas of smartphone-driven commerce, PayPal is a force to be reckoned with in the world of mobile payments.