PayPal Formally Moves Into Mobile Payments

Written by Evan Schuman
July 10th, 2007

The bandwidth, input and software limits of smartphones makes even the most basic mobile purchases difficult. PayPal’s market entry is a quintessential “more is less” strategy.

As smartphone marketshare rises, the temptation for e-tailers to push mobile purchases is irresistible. But typing in street addresses and credit card numbers is hardly pleasant on a handheld.

EBay’s PayPal unit formally entered the mobile payment space Tuesday, arguing that their checkpoint gets more valuable as they reduce the number of features. (Now if only Microsoft could think that way.)

Tuesday actually marked the day PayPal issued a news release about MobileCheckout, which has been fully functional and available since June 11, a full month before the announcement, according to PayPal spokesperson Jamie Patricio.

The service allows retailers to select certain products they want to push for mobile purchases. The pages are then coded in a very simple way, allowing for relatively fast and easy mobile display.

“Most merchants have to adapt (their pages) for the mobile web anyway,” said Matt Weathers, the group product manager for PayPal Mobile.

The problem with mobile purchases today is not merely lack of convenience or speed, Weather said, but of impossibility. When many consumers try to make purchases from their cellphones on a regular E-Commerce site designed for PC access, it simply won’t work because the page would time out long before the processing would be complete, he said.

The present shortage of “complete this form” and “remember my passwords” programs for smartphones further aggravates the problem, forcing customers to repeatedly type in very long strings of data.

“We’re saying, ‘Just the essentials,’ with less information to pull up and have to load,” Weather said.

From an IT perspective, the checkout process is typically the most complex and trouble-prone area of an E-Commerce site. Beyond the listing of the intended purchased items, it needs to navigate discounts, state tax, shipping charges, shipping arrangements and payment processing, along with inventory access (both to verify that the product is available to ship and to make sure that the inventory is reduced once the order is finalized). Remember that each of those requires interaction with a different database and sometimes external companies, such as a retailer that needs to schedule shipments through FedEx and payments through various processors depending on the selected payment method.

Among the ways that PayPal Mobile has tried to simplify things is by “removing some of the things that make integration difficult” including some tax lookup and shipping functions. “There’s now no option (for the customer) to get the shipping details” from PayPal Mobile Checkout, Weathers said, adding that the customer would simply have to go back to the site after the purchase and get the shipping details there.

Although PayPal and GoogleCheckout have recently been battling a war of words, Paypal?for the moment?has the mobile checkout space pretty much to itself.

“There?s not too much commerce?other than ringtones?on the mobile web these days, so they?re early to the game, but it?s a no-brainer,” said Forrester Research Senior Retail Analyst Sucharita Mulpuru. “Someone once described the mobile web to me as similar to buying a lotto ticket: The investment isn?t too high, but the payoff could be significant if the channel gains traction.”

Paula Rosenblum, a senior analyst with Retail Systems Research, agrees that the potential for mobile commerce is huge. “We expect mobile commerce to be the next disruptive force in retailing and we expect it to happen sooner than anyone anticipates. North America lags behind Europe and Asia. The technology is there and the consumers are ready for it,” she said.


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