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Ebay Using GSI Buy To Move In-Store
Unlike most alternative payment schemes, PayPal won’t have to sell these retailers on a speculative business model or convince banks and payment-card companies to play along. PayPal has customers and a decade-long track record. That helps. It also helps that eBay isn’t a retail competitor, a collection of mobile operators, a phone maker or an operating system creator. Telco infighting and phone-maker dithering don’t inspire confidence among retailers that are already comfortable with plastic.
But having the infrastructure and track record still only gets PayPal (and eBay) a third of the way to making a play for in-store payments this year. A second crucial piece is encouraging PayPal users to use PayPal in brick-and-mortar stores. The third—the piece in the middle—is the stores themselves.
How exactly will that work? PayPal won’t talk specifics about its push into stores. Aside from hiring Kingsborough, all PayPal CEO Scott Thompson—a former Visa executive—will say is that the plan involves a mix of mobile and social. “We’re going with a whole new experience that is different than the traditional card-like experience. That requires us to rebuild the whole infrastructure around point-of-sale,” Thompson told Reuters a few weeks ago.
That sounds a lot like yet another POS technology to sit alongside magstripe swipers, contactless-card readers, Chip-and-PIN slots, 2D barcode scanners and NFC terminals. We’re still waiting to hear which of those not-traditional-card approaches PayPal has in mind.
That brings us finally to Visa and MasterCard. Because right now most PayPal payments eventually go through a conventional payment card account, accepting PayPal just adds another middleman to every transaction. That won’t encourage retailers to make the jump beyond plastic.
The only way for eBay to make PayPal truly worthwhile for retailers is to significantly cut the cost—and that means cutting Visa and MasterCard out of the loop.
That’s not impossible. But if that’s what eBay has in mind, its next big deal should be to buy a bank.
-Marc
March 31st, 2011 at 10:49 am
I think you are missing the most important aspect for brick-and-mortar stores, the interchange fees. More precisely the lower interchange fees that PayPal is promising. There are a lot of traditional retailers that are starting to look at other forms of payments in hopes of lessening this expense. It is obvious that this is what will lead to the adoption of PayPal and other forms of payment.
March 31st, 2011 at 11:53 am
The story in question actually did address the interchange issue (“The only way for eBay to make PayPal truly worthwhile for retailers is to significantly cut the cost”) but, to your point, it didn’t stress it that much. Then again, we have talked about the fee being the most crucial aspect of this a dozen times–and it’s not like most retailers don’t know that already, so not so sure about how much obvious that point should have been made. Interchange (and related costs) ARE the issue. If PayPal gets everything else right but charges as much as or more than Visa does, it won’t work. And if PayPal charges a lot less than the brands, they can get a heck of a lot wrong with everything and STILL win the day. So, yes, we probably should have at the least moved the interchange reference much higher in the story.
March 31st, 2011 at 2:43 pm
Why would eBay need to buy a bank to cut Visa/MC out of the loop? PayPal already has at least one banking license in Luxembourg.