Leave Your Wallet At Home? PayPal Has A Digital Answer…
PayPal rolls out its alternative payments platform with Home Depot and other big-box retailers...could this spell the next chapter of payments and threaten the supremacy of credit cards as a payment choice?
The downstairs faucet springs a leak, spewing water everywhere, and just like that your lazy Sunday just got a little crazy.
You run to Home Depot for a washer, conveniently forgetting your wallet when you rushed out the door.
No problem: welcome to world of mobile payments, post-plastic cards.
Register your cell phone and PayPal account number at HomeDepot.com and all you have to do at the register is type in your cell phone number, a PIN and your PayPal account, and you are on your way.
The service is available at some 2,000 Home Depot stores around the country, offering a glimpse of the wallet-free, card-less world of mobile payments long promised by technology companies.
Smartphone payments already allow you to buy a cup of coffee at Starbucks (the world’s largest mobile phone payments network at the moment), order and pay for a meal at a local restaurant before you even arrive, or loan your kids money for a movie.
Everyone recognizes the potential for smartphones – now in the hands of more than half of all U.S. consumers, but now the major players are joining forces to make mobile payments a reality. Banks and credit card firms are partnering with wireless carriers, handset makers and software developers to transform phones into digital wallets.
This year will see more than $171.5 billion in mobile payment transactions — a rise of over 60 percent on 2011′s $105.9 billion, according to research firm Gartner Inc., which predicts that smartphones will account for close to two-thirds of all U.S. mobile phones.
To see the potential for mobile payments to catch on with consumers, look no further than Starbucks’ “Touch to Pay” iPhone app, which has leapt to the front of the mobile payments pack. The ubiquitous coffee chain has processed more than 45 million transactions in less than a year.
The popularity of the app has spawned a host of mobile payment entries this year, none bigger than Google Inc., which has introduced its Google Wallet smartphone app, which enables users to load their Visa or MasterCard number into their phone. The next version of Apple's iPhone will have a Passbook that will store customer loyalty cards and movie tickets, and Microsoft Corp.'s new phones will also contain digital wallets. In addition Isis, a joint venture of Verizon Wireless, AT&T Inc. and T-Mobile, is working with Discover Financial Services to offer a mobile wallet to more than 200 million smartphone users.
In Los Angeles, users of the PayDragon app can order whatever they'd like from local food trucks. Simply pick a truck, hit its icon and voila, pick up your food. Diners across the country are using other mobile payment apps too, including Square, Kuapay and Tabbedout, which allows you to pay for a night out the next day, should you forget to close your tab.
PayPal, meanwhile, sees a much broader use for its service than big-box retailers. The eBay subsidiary has expanded its mobile payments service to 15 new retail partners, including Abercrombie & Fitch, Advance Auto Parts, Barnes & Noble, Foot Locker and J.C. Penney. The new partners add nearly 17,000 stores that will accept PayPal, and the company says more merchants will jump on board throughout the year.
With 110 million active PayPal accounts worldwide, it’s a legitimate threat to bank dominance of payments, and the company also is busy making sure that its service is deeply embedded within the payments world. PayPal is furiously working to get the service integrated into new point-of-sale terminals made by VeriFone and Equinox, the No. 1 and No. 3 makers of payment terminals in the United States. It already has ties to the other big terminal manufacturer, Ingenico.
Down the road a bit, look for services like PayPal’s mobile payments to transition to full-fledged mobile wallets – and that’s when it really gets interesting. The leading card associations are in on the mobile wallet movement – Visa’s V.me and PayPass Wallet Services both launched this year. Both are open solutions, meaning that they allow you to add your Visa, American Express and Discover cards, whether credit, debit or prepaid. Banks are building their own digital wallets as well. Capital One’s, for example, builds in a “daily deals” program that delivers money-saving offers based on your shopping habits.
A full-scale mobile wallet could allow you to get customized discounts based on your shopping patterns, store your rewards points for you and allow you to switch payments from card to card. Imagine walking into your neighborhood Home Depot and getting a text message that immediately welcomes you, sends you check-in points and informs you that the lawn mower you bought online minutes earlier is ready to be delivered to you car.
No lines, no checkout: it’s the Holy Grail of payments, a brave new world for retailers and consumers alike.
Image: Oliver Hoffmann / iStock.
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