Mobile Matters


Can PayPal Here End Square’s Reign as M-commerce Kingpin?

by: | March 22, 2012

PayPal made a relatively seamless transition from the desktop to the mobile channel. The eBay-owned digital payment processing platform—which boasts over 104 million active users worldwide, along with more than 8 million merchant partners—handled more than $4 billion in mobile payments in 2011, and eBay CEO John Donahoe predicts PayPal will eclipse $7 billion in annual mobile transactions this year. Now PayPal is making another transition, extending its services from the online world to the offline space with new transaction solutions optimized for large, brick-and-mortar merchants, as well as small businesses.

For starters, this May, PayPal will roll out a reconstructed digital wallet that dramatically expands the mobile transaction services that it is currently trialing in more than 2,000 Home Depot stores across the U.S.

The revamped wallet will enable consumers to search for items, compare prices and create shopping lists—it also will identify deals and coupons tied to wishlist products when the user enters the store. The PayPal wallet additionally will enable users to toggle between multiple funding sources, pay in installments, and apply different sources of value (e.g., gift cards, airline miles, and loyalty points).

“Let’s say I want to combine the value of 10,000 airline miles with a $100 gift card to pay for the new TV I just bought,” writes PayPal vice president of global product and experience Sam Shrauger on the firm’s blog. “There’s no way I can do that right now—but the PayPal wallet will.”

PayPal isn’t stopping there—it’s also introducing PayPal Here, a triangle-shaped, thumb-sized card reader that plugs into a smartphone audio jack, enabling small businesses to accept plastic anywhere their work leads them.

PayPal Here users also can leverage their phone’s camera to process cards and checks and invoice directly from the mobile app. If the PayPal Here concept and technology sounds familiar, it should—it’s a full-on assault against Square, the mobile payment startup led by Twitter founder Jack Dorsey.

More than a million merchants in the U.S. now use the Square credit and debit card reader, which is sold across 9,000-plus Apple, Best Buy, RadioShack, Target and Walmart locations nationwide, and the company processes more than $4 billion in payments each year.

PayPal Here is not the first legitimate threat to Square’s dominance: Intuit’s GoReader also lets retailers process card transactions via smartphone. But PayPal Here is different, and not only because of PayPal’s existing reach and scope—it’s undercutting Square’s fee structure, charging merchants 2.7 percent per transaction compared to the 2.75 percent levied by Square.

“Merchants are also given a business debit card for quick access to their funds and 1 percent cash back on eligible purchases, which means if you use the debit card, your fees are actually just 1.7 percent,” adds PayPal vice president of mobile David Marcus in a blog post.

Time will tell how Square reacts and whether it brings its fees in line with PayPal Here. But for now, Square remains the payment processing platform to beat, because it offers so much more than payment services.

In early March, it unveiled Register, a new application enabling mom-and-pop businesses armed with Apple’s iPad tablet to accept cash and credit transactions, customize inventory, integrate loyalty programs, and issue receipts via text, email, or printed copy. Register essentially replicates and enhances the features of conventional cash registers, incorporating mobility as well as connected services like interactive web analytics and custom employee permissions

Of course, PayPal Here undoubtedly will increase its feature set in the months ahead. It’s far too soon to declare a victor, but one thing is clear: Regardless of which solution wins, the shape of payment processing is going to change forever.Marketing Zeus

Posted in: B2B, B2C, E-Commerce, Geolocation, Mobile Development, Mobile Matters

About the Writer:

Jason Ankeny is the executive editor of the FierceMobileContent and FierceDeveloper e-newsletters as well as a regular contributor to Entrepreneur magazine and the website All Music Guide. Additional credits include efforts for publications including Rolling Stone, Wax Poetics and No Depression, along with liner notes for a number of album releases. He lives in Chicago.

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