PayPal Expands Mobile Payment Program
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PayPal, a subsidiary of eBay (NASDAQ: EBAY), has announced two new partnerships that will bring the company’s mobile payment system to the register systems currently in many brick and mortar stores. VeriFone Systems (NYSE: PAY) and Equinox Payments are the point-of-sale system manufacturers that will help PayPal spread its mobile mission.
VeriFone machines include 80% of the top 200 largest retailers in the US. Equinox is used by three of the top ten and Ingenico has 2 million domestic terminals with an additional 13 million international. The triad of agreements should provide PayPal with access to approximately 40 million payment terminals.
PayPal’s mobile payment system got its initial test run in 2,000 Home Depot stores. Fifteen additional companies have now signed up to feature the service in-stores. The list leans heavily towards apparel including American Eagle Outfitters, Abercrombie & Fitch, and Aeropostale. American Eagle and two other participants, Jamba Juice and Toys R Us, also allow for the competing Google (NASDAQ: GOOG) Wallet mobile payment system.
PayPal vs. Google Wallet
The majority of mobile payment systems making the news rely on near field communication (NFC), a radio communication method that requires cooperation between a mobile device and a chip in the terminal. That’s how Google Wallet operates. A user with one of the few mobile phones currently supporting Wallet must link a payment method (either a credit card or prepaid card) to the device. Swiping the mobile phone at participating retailers creates a payment transaction with the registered financial source.
The Wallet system has faced some security concerns. Hackers were able to determine that mobile devices could be easily compromised to grant access to the linked payment method. While hackers wouldn’t be able to charge up the associated credit card, it would be possible to drain an associated prepaid card. Google has addressed the concerns but the incidents cast a shadow over Wallet’s safety.
PayPal’s consumer mobile payment system (not to be confused with PayPal Here, which is an enterprise mobile payment offering similar to Square) isn’t solely reliant on a mobile device. The participation of Equinox Payments will allow for mobile payments via an app but users can also login to a terminal screen, providing PayPal login information much as one would a debit card PIN when prompted. There is also a physical Access card that PayPal will provide for customers who prefer more tangible of payment methods.
Offering a wider range of payment opportunities could attract a larger audience that may express caution at the still relatively new field of NFC payments.
Jumping Ahead in Line
There’s a deluge of mobile payment methods coming down the pipeline, including cooperatives from major credit card and telecom companies. PayPal has a good chance of getting out of the gate strong and establishing itself as a frontrunner in the mobile payment business, which Parks Associates estimates will reach “hundreds of billions” in revenues within the next three years.
PayPal has the benefit of strong brand recognition and a built-in base of 104 million users. But its adoption will depend on how convenient the payment process is for consumers and how much time it will save at the checkout.
LynBetz has no positions in the stocks mentioned above. The Motley Fool owns shares of Google and VeriFone Holdings. Motley Fool newsletter services recommend eBay and Google. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.