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INSIDE PAYPAL’S NEW PLAY FOR OFFLINE COMMERCE: eBay-owned PayPal is putting together an ambitious plan to become a dominant force in offline payments. BI Intelligence visited the company's Manhattan offices last week and caught a glimpse of what PayPal-powered bricks-and-mortar commerce would look like: an integrated ecosystem of consumer apps, point-of-sale hardware and software, and beacons. PayPal employees demonstrated how the new devices and apps would work in three different simulated retail environments: a pop-up store, a food truck, and a toy store. It’s all part of what PayPal President David Marcus has called “Money 3.0,” moving commerce beyond cash and credit cards. PayPal and eBay are competing with Silicon Valley-based companies and legacy players to power the $10 trillion market in global commerce, much of which is still offline.
A FOCUS ON EASE-OF-USE: The key, PayPal spokesman Josh Beyers told us, is making payments effortless, for consumers and retailers. The PayPal app already allows payments to be made fairly simply: customers open it when they’re in participating stores and swipe a button to “check in,” which puts their photo and PayPal account on the merchant terminal. Identity can then be confirmed and a payment effected without a credit card swipe. The system will also soon include app-generated bar codes, which can be scanned at checkout to make payments at large retail chains. Merchants can also sign up for PayPal Here, a credit card reader that transforms tablets and smartphones into registers. Other companies, including Square, Starbucks, and Revel Systems, offer similar tools. But PayPal says it is working on innovations like automatic check ins, and beacons that accept payments directly, which means people would be able to pay even more easily. “What if you didn’t have to reach for your phone at all?” said Beyers. “We’re trying to take away any friction of reaching for a wallet or a phone.”
PAYING FOR BANANA BREAD WITH PAYPAL?: PayPal has one advantage over its competition. It already has online ubiquity. “We’ve got this huge consumer base that’s already using it online, which is very attractive to retailers,” said PayPal’s Beyers. He put the company’s active user base — those transacting at least three times a year — at 66 million domestically and 137 million worldwide. But moving into the hyper-fragmented world of offline retail is easier said than done. PayPal has been savvy in establishing its footprint with large chains like Home Depot and Jamba Juice. But integrating a long-tail of smaller neighborhood merchants is a different game. Thousands of restaurants and cafés in the U.S. are signed on with PayPal through a food delivery service, Eat24. But in an informal survey carried out by BI Intelligence in Manhattan, very few of these locales even knew they accepted PayPal for payments. At Gramercy Bagel, an attempt to buy a slice of banana bread with the PayPal app was unsuccessful. “It’s just $2,” said an employee. “Don’t you have any cash?” (Tech Reporter Keith Griffith For BI Intelligence)
SQUARE GETS A REVOLVING CREDIT FACILITY. Five-year-old mobile payments startup Square has secured a revolving credit facility to help the company continue to grow, according to a report from CNBC. Goldman Sachs led the deal. Although the amount of credit facility was not disclosed it's suspected to be in the low hundred millions, according to a source familiar with the matter. A Fox Business report from earlier this year claimed Square would not complete an IPO in 2014 due to an insufficient "revenue run rate," but a credit facility is often a signal of an impending initial public offering, so Square's move adds new uncertainty to the question of whether it will soon debut in the public markets. (CNBC)
WAL-MART DUMPS DISCOVER FOR MASTERCARD: Ending a nine-year partnership with Discover Financial Services, Wal-Mart will now be offering co-branded store cards with MasterCard instead. The deal extends to store cards from Wal-Mart owned Sam’s Club as well. Wal-Mart also announced that GE’s retail finance unit will continue to issue store cards for Sam’s Club. (Bloomberg & Sam’s Club)
GOOGLE WALLET EXECUTIVE RESIGNS: Peter Hazlehurst, director of product management at Google Wallet, has resigned from his position, according to the Wall Street Journal. He is the latest of a long series of executives to leave Google’s digital wallet business unit, including Jonathan Wall and Marc Freed-Finnegan, founders of payments and retail software startup Index, which we recently profiled. (Wall Street Journal)
CANADA ENDS DIGITAL CURRENCY PROGRAM: Canada has been developing a digital currency called MintChip, but the Royal Canadian Mint said on Friday that is no longer developing the digital currency and plans to sell the business. The Mint had originally announced the MintChip project in April 2012. (Wall Street Journal)
AMAZON'S NEW BARCODE SCANNER: Amazon is testing a new product, featured on its website, called "Amazon Dash." The device is a barcode scanner that can be used to scan the barcodes on items in a user's home. When an item is scanned it's automatically added to the user's shopping list. It looks to be aimed at grocery shoppers who use Amazon's grocery delivery service, Amazon Fresh. It's unclear why Amazon would offer Dash when the technology could be built into a smartphone app eliminating the need for an extra device. (Amazon Fresh)
FIRST DATA GETS NEW CTO: Payment processor First Data announced on Friday the appointment of Michael Manos as its new chief technology officer. Manos previously served as CTO of AOL. Prior to that Manos worked as a vice president at Nokia. (First Data)
REGULATORS ISSUE WARNING ON ATM HACKS: The Federal Financial Institutions Examination Council in the United States is issuing alerts warning financial institutions of the potential of ATM hacks that allow criminals to bypass withdrawal caps and withdra as much cash as is stored in the ATM, thus earning the name "Unlimited Operations Attacks. "A recent unlimited operations attack netted over $40 million in fraud using only 12 debit card accounts,” says a document attached to the press release. (FFIEC)
OVERDRAFT REVENUE DECREASES BUT FEES RISE: After the 2008 financial crisis, banks were subject to a number of new regulations which sought to increase competition and protect consumers. Some of these regulations made it more difficult for banks to charge overdraft fees and as a result revenue from these fees dropped from a peak of $37.1 billion in 2009 to $31.9 billion in 2013. In an attempt recoup lost revenue, banks have been increasing the price of overdraft fees. The median overdraft fee has risen from $25 in 2008 to $30 in 2013. (Wall Street Journal)
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