PayPal's Offline Play

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.

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 neighbourhood 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. 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 $US2,” said an employee. “Don’t you have any cash?”

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