PayPal says it will enable payments within two clicks, charging vendors five per cent plus five cents for transaction under $12.
Facebook will feature the new payments as a method of buying its Credits for use in games on its platform.
There’s plenty of competition in micropayments, but PayPal has an immediate leg up here as the only payment platform with serious brand recognition. That’s a big plus for any company that wants users to entrust it with their credit card numbers.
Here’s an early reaction from JP Morgan analyst Imran Khan:
- Facebook, FT.com among micropayments partners. PayPal will roll out a new product, called PayPal for Digital Goods, later this fall. The product will use PayPal’s micropayments rate card (5c + 5% of payment under $12). Facebook will integrate the product, which is intended to work within a particular site, allowing payments without sending users to PayPal’s site. Third-party estimates suggest the US market for virtual goods may exceed $1.5B in F’10.
- VeriFone iPhone app integration. VeriFone’s iPhone card acceptance technology will be intergrated with PayPal to support PayPal’s Bump technology and tighter transaction reporting for traditional card-based payments. PayPal also announced a 3.0 version of its iPhone app, PayPal for Mobile. We view Mobile commerce as an important contributor to growth in F’11 and especially beyond. Additionally, we think the integration of mobile with bricks-and-mortar retail (e.g., location-based couponing) is an attractive opportunity.
- Embedded payments offering. PayPal is rolling out a tool that enables merchants selling physical goods to process a PayPal payment without sending the user to PayPal’s site. This should simplify checkout flow and thus help PayPal to continue to grow Merchant TPV, which we project to increase 25% in F’11E.
- New CFO, not a new position. Since the recent departure of Mary Hentges, who became the CFO at CBS Interactive on August 31, the CFO role was being filled on an interim basis by eBay CFO Bob Swan. As such, we do not believe the appointment of Mr. Dupuis should be interpreted as signaling a significant strategic change for PayPal.
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