The big daddy of payments, says bring it ON with PayPal Beacon!

It would not be wrong to say PayPal is where it all began... They started innovation in payments back in 1998. A whole lot of start ups spawned from PayPal mafia over the last 5 years or so .... At PayPal innovation never stops, it is still quite influential in surprising the mobile payments industry by launching new features like payment through facial recognition, paying restaurant bills through a mobile app and now cashless payments free from mobile devices and cards.

How many of the new and shiny payment systems can boast of an experience where the customer walks into the shop, buys whatever he wants and walks out without ever taking out his phone or wallet from his pockets. PayPal’s newest venture ‘Beacon’ claims to have made this a reality.

PayPal initially experimented with Geo locating, leveraging GPS and Wi-Fi for iOS and android but they found that it sucked the battery life too quickly and would be a nuisance to customers. They turned to BLE or Bluetooth Low Energy through which connected devices can communicate with each other with the consumption of a very low amount of energy. This led to the creation of PayPal Beacon, a hardware device for merchants designed to enable a hands free payment experience for consumers.

How exactly does the Beacon work? Consumers have to download the Paypal app for their smartphones. Once a customer walks into a store, the hardware automatically detects the users phone and triggers a vibration to confirm check in. The customers photo then appears on the merchants’ point of sale system after which the payment confirmation is done verbally without touching his mobile phone or credit card. The receipt is sent directly via email.

Unlike most other technologies, PayPal Beacon will not track the customers location constantly. 'If you enter a store and decline to check in, or just ignore the prompt entirely, no information is transmitted to PayPal or the merchant,' said David Marcus, President, PayPal, while addressing concerns over security. Marcus was a serial entrepreneur before PayPal acquired his mobile payments company Zong in July 2011.

Stores running point of sales system compatible with PayPal like - Leaf, Erply, Leapset, Booker, NCR, Micros, PayPal Here, ShopKeep, Revel, Vend and TouchBistro , will plug a PayPal Beacon device in a power outlet in their store. PayPal Beacon sends out a Bluetooth low energy signal to any customer who has the PayPal app on his smartphone. It’s faster than swipe or tap and go, faster than near field communication, uses less battery power than GPS, has better accuracy and maintains privacy and security, said Jeff Clementz, Managing Director, PayPal Australia. The consumer is in control.

The announcement of PayPal Beacon comes just one week after launching their new iPhone and Android apps that allow consumers to make orders and pay before stepping into the shop. The Beacon device is expected to sell at around $100 according to the Australian Financial Review, which makes it very affordable for small merchants and businesses. Beacon will be launched in 2014 and will be available in US, Canada, UK, Hong Kong, Australia and Japan.

LTP View: PayPal’s use of Bluetooth Low Energy solves a major problem for consumers by significantly reducing the battery consumption in smartphones. This also gives it an advantage over competitors in the same field like Square . It will not be easy to convince its 100 million plus users and the merchants as to the benefits of a hands free transaction over the traditional card swipe. When the Beacons hardware detects a customer with the app who is nearby, the merchant can attempt to engage him with special offers or discounts - this may not go well with the users as they may feel that their privacy has been intruded. The main selling point is Beacon’s feature of enabling a transaction to take place without opening an app, without GPS, and even without phone signal. Economical pricing of the device on release may help PayPal gather small merchants and retailers to sign up for this service.