September 11, 2013
If last 5 years were about remote online payments and payment gateways for e-Commerce, the next five would be about proximity payments and in person payments such as in restaurants.
PayPal announced a major update to its iOS and android apps on 5th September 2013, revealing features designed to make it more convenient for customers to pay restaurant bills and take advantage of deals based on location. PayPal which is a subsidiary of eBay has more than 130 million users in 193 countries around the world. This update brings about major changes to its app which previously only monitored tracking purchases, sending and requesting money.
PayPal’s partners for in store payment include - Advance Auto Parts, Abercrombie & Fitch, Aéropostale, Barnes & Noble, American Eagle Outfitters, Foot Locker, the Home Depot, Guitar Center, JC Penney, Jamba Juice, Jos. A. Bank Clothiers, Office Depot, Nine West, Tiger Direct, Toys R Us and Rooms To Go among others.
Some functions of the app, such as accessing and managing PayPal account and transferring money to a friend, remain the same. With this update, the PayPal pre order feature which was made possible through its partnership with Eat24 is available at more than 1000 restaurants. When in action, nearby restaurants and shops offering its coupons and services are displayed on the phone. The app leads the customer to the full menu where the consumer can customize his order. Once the order has been placed, the customer does not have to wait in queue at the restaurant and can directly pick up his food or drink. After transaction is complete the receipt is sent to the customer through e-mail.
PayPal’s current setup for paying at a restaurant is integrated with NCR. Paying the bill requires the customer’s server to enter the special code onto the restaurants NCR hardware and bring it to them so they can then enter it into their PayPal app. Customers cannot just give their name to the server as they would at a store. Although PayPal can tap in to NCR’s technology in thousands of restaurants, the payment process is made a little more cumbersome for the customer.
PayPal now displays the customer’s bank balance and any bank accounts, debit, or credit cards that he may have linked to his PayPal account. Also the consumer can conveniently switch between the methods of payment with a few taps. Their Bill me later feature offers up to $2000 dollars worth of PayPal credit. PayPal’s new mobile app offerings are part of a larger industry initiative to make the idea of paying without cash or credit more appealing to the mainstream consumer, said Sandy Shen, research director, consumer services, Gartner. On an individual basis, none of the features are new to the market, but the combination of those increase the value of the offering.
LTP View: It will be extremely challenging to get its 100 million plus member base to understand that PayPal is now also a platform to order food, redeem coupons and gifts etc. The biggest hurdle that PayPal faces is making the benefits of mobile payment obvious to the customer. An excellent advertising and marketing strategy combined with restaurant participation and exclusive discounts may be the right direction to take. Further expansion of the capabilities and functions of the app may help in increasing the comfort level and satisfaction for the customer and help expand their member base. The major competitors for PayPal in this field are Square, Google and Groupon. whoever combines payments with loyalty and discounts most effectively would lead the market.