Google isn’t the only unorthodox player moving into the offline payments space. PayPal, like the search giant and Visa, is planning to launch a “Wallet” product that aims to replace traditional credit cards at registers.
“If someone had told me ten years ago that PayPal would be doing offline payments, I would have laughed,” said Laura Chambers, PayPal senior director of customer experience, at a showcase for the new PayPal Wallet Wednesday. “[but] it’s no longer going to be about online or offline commerce, ecommerce, m-commerce. It’s just going to be about commerce.”
PayPal Wallet, which is set to start rolling out within the next 12 months, is like its competitors’ counterparts in many ways. It allows users to pay from multiple accounts, store and use gift cards, access special offers and store receipts. Its biggest distinction is that it is not attached to NFC, and therefore not restricted to use on NFC-enabled phones. Users can pay at PayPal-enabled terminals using a PayPal credit card, typing in a PayPal pin or eventually by using an NFC-enabled tap.
This gives PayPal a huge immediate advantage. In order to use PayPal Wallet, users don’t need to own NFC-enabled phones — which very few of them do. Meanwhile, partner merchants only need a software upgrade to their terminals in order to begin accepting PayPal, not the hardware upgrade they would need to accept mobile tap-and-go payments.
Mobile payments enabled by NFC, however, still have the advantage of allowing consumers to choose which payment method to use before tapping a payment terminal. When they’re swiping a PayPal card or entering a pin, they can’t easily switch between gift cards or multiple accounts in the same way the Google Wallet allows users to swipe through their cards before paying. Technically, PayPal customers could adjust their default settings using the PayPal Wallet mobile app before swiping the card, but that will most certainly make the service less convenient.
In order to make up for this drawback, PayPal made an interesting move: It allowed customers to change their method of payment after they make a purchase. A user could pay for something using a Mastercard, take it home, and then later log in to his or her PayPal account to switch the payment method to Visa instead without any additional fee. Paypal is also offering a payment plan for expensive items at select merchants to some of its users. The merchants get paid immediately, but if the customer choses, they can pay PayPal in several payments.
Though PayPal is not the first payment company to use the word, it was possibly the first to truly be a digital wallet. The service was built on the capability to use multiple payment sources — credit cards, checking accounts and other loyalty cards — from one account. In fact, the company sued Google and two of its former executives shortly after the announcement of Google Wallet over trade secrets.
Even so, PayPal is not known for its exploits beyond payments. And like many payment companies, it has recognized that enticing customers to switch to a new form of payment is going to be about much more than payments.
“Swiping a credit card is a pretty good experience,” Chambers says. “A tap isn’t much easier than a swipe.”
In order to create deals and in-store integration features that it hopes will entice consumers to abandon their credit cards in favor of the PayPal Wallet, its parent company eBay has acquired several companies.
Where, which eBay acquired in April, holds a patent for a technology called geofencing that enables PayPal’s new wallet to alert customers when there are offers near them. When walking past a favorite coffee shop, for instance, a customer might get a push notification with a discount on coffee. In order for a merchant to send an alert, the recipient needs to add it to a white list (in other words, PayPal is not going to scare customers by blasting them with offers from surrounding merchants).
A related deals feature allows users to compile a wishlist of products. Their white list of companies can offer them deals on the item. If they’re compiling a grocery list, for instance, they’ll be alerted of the coupons available for the items on that list when they enter a vendor that accepts PayPal payments.
Two other recent eBay acquisitions, barcode-scanning price comparison app Redlaser and local shopping search engine Milo, are evident in a PayPal Wallet feature that allows customers to scan an item in a store in order to purchase it from that particular store.
The app also works as a loyalty card. Similar to the Starbucks card that PayPal powers, merchants can chose to reward customers who accumulate points for purchases and checkins.
With its loyalty points, offers and checkins, PayPal Wallet has not only moved into the competitive offline territory of credit card companies, but also into those of checkin apps like Foursquare and deals platforms like Groupon.
“In the offline world,” Chambers says, “if we just changed transactions, I don’t think anybody would take it up.”