PayPal lifted the lid off its future merchantstrategy and if the press coverage is any indication, it hasstirred the pot with a very large spoon. Even with millions ofconsumers registered as PayPal users, the transition that has totake place is for consumers to prefer using PayPal -which is asmuch about convenience and value as its mainstay value: security.Merchants may well offer PayPal as an optional payment servicein-store if it can be incorporated into their POS and promotionalstrategies with some measure of efficiency and assurance ofspending lift. However, the market is already beginning to questionthe possibility of diminishing returns on daily deals anddiscounts, so one would expect that the bar in that regard will bethat much higher in the future to ensure any measurablebenefit.
It’s difficult to opine on the probable success of this launchuntil we’re able to get a closer look to what’s exactly ready forprimetime, how its implemented, across what kind of merchantfootprint, and ultimately, whether or not consumers find more valuein pointing and clicking than swiping. Consumers have indicatedthat they most often choose PayPal for online purchases as a saferpayment method. This preference will be a boon to the company as itrolls out this mobile payment method, since security concerns are amajor constraint in consumer adoption. If PayPal is successful insigning up large enough merchants who are willing to capitalize theinfrastructure and promotional programs, and offers them acompetitive fee structure (compared to the now low-cost debitinterchange fee structure), then it may very well achieve thesuccess it craves, that of becoming a fifth global paymentsnetwork. These are not insignificant hurdles.
At the same time, MasterCard held its annual meeting in New Yorklast week, where their Google Wallet strategy was a very hot topic.Only available on Nexus S phones that run on the spring network(for now), the payment device is activated by tapping the phone onan enabled PayPass terminal. MasterCard also demonstrated some ofthe application output from their MasterCard Lab initiative,including coupon sharing apps.
Putting aside any hype, these announcements and demonstrations area glimpse into the future of electronic payments. And perhaps itisn’t even that important who wins or loses at this point as longas the innovative ideas and new technologies keep on coming. Onceconsumers and merchants get a real hold of these devices and areable to see how convenient/safe/efficient/valuable they are, themarket will settle on a direction.
In the meantime however, issuers should be getting consumers readyfor these changes by building as much equity into their paymentfranchises as they can by offering comprehensive sets of paymentproducts that are managed and operate as seamlessly as possible.Looking at the video of the new PayPal experience, perhaps the mostimportant part was the suggestion that consumers could directpayments to any account. This is where brand disintermediationhappens and the threat of lost transactions is the greatest. Theform factor right now, is almost irrelevant, since consumers arenot ready to give up their plastic cards. But, plastic cards canevolve too.