eBay CEO Pooh-Poohs NFC, Says Chains Won’t Permit It

Written by Evan Schuman
July 21st, 2011

eBay CEO John Donahoe argued Wednesday (July 20) that PayPal will dominate in both mobile payments and in-store POS, mostly because few retailers will end up being able to stomach deploying unproven near-field communication (NFC) applications at their ultra-critical POS. Taking a direct swipe at Google Wallet—and, to a lesser extent, ISIS and Apple—Donahoe said that NFC is simply too unproven and that PayPal is a more comfortable choice.

“I was with a large merchant last week who described NFC as Not For Commerce,” Donahoe said during a quarterly earnings call. That is “simply because when you’re a large merchant and you have 500 stores and 14 checkout lanes per store, you want zero friction at checkout and point of sale. And they’re not going to allow anything that has friction. No proprietary systems.”

Beyond proprietary hardware and software, the lack of industry standards will also be a big help to PayPal, he said.

“The people who are really going to drive this at the end of the day are going to be the merchants, in particular, the large-scale merchants, who drive 80 percent of the point of sale spend. That’s drugs, that’s clothing,” he told investors. “While I think there will be experimentation with NFC, I don’t think you’re going to see widespread adoption of NFC in the large merchants for quite a while, until there are standards.”

Earlier in the call, Donahoe defined “quite a while” as potentially being until about 2016. “With PayPal, we’ve had merchants reach out to us quite aggressively and say they want us to bring PayPal into the point of sale. We see it as an incremental opportunity and a fairly significant incremental opportunity that will play out over the next three to five years,” he said.

Donahoe specifically pledged—without mentioning any names or any other specifics—that PayPal will be on trial “with a major U.S. retailer” by the end of 2011 and will have “as many as 20 national retailers” in trials next year.

The mobile-payment players—eBay/PayPal included—are being very casual with terms like proprietary, which could also be applied to PayPal. The friction Donahoe referenced is inevitable with any new technology, and it’s hardly likely that PayPal-powered POS efforts would be any more friction-free than its rivals.


4 Comments | Read eBay CEO Pooh-Poohs NFC, Says Chains Won’t Permit It

  1. ed Says:

    Do anyone see the oxymoron in John Donahue statements?

    Here is a company that started off as and was originally shunned by large established corporations and owe growth to the long tail of individuals and small businesses using Paypal to pay for auctions. Now we hearing Mr. Donahue speaking of “large” retailers acceptance of new technology such as NFC and he is now shunning NFC in the same manner Paypal was shunned. Interesting!

    Again, the overall problem I see in US-based discussions of NFC is too much focus on the “big boxes” and large retailers. It is highly interesting how NFC and mobile payments are growing so fast in emerging nations among small to medium size businesses but here in America – big banks, big retailers and big telcos.

    Now I said my peace, I have to go back into stealth mode and watch this US-Based approach run absolute counter to how the rest of the world is approaching next generation retailing..

  2. Roger Applewhite Says:

    How many times does our industry have to go through the “POS revolution” hype? Anyone remember when STAR brought PIN debit to the POS in the West? They subsidized adoption (consumer coupons) and interchange ran backwards! (Issuers paid merchants.) In my view, that was the LAST big change we’ve seen at the POS, and that was the mid 80s (and took a solid 10 years to catch on). Since then, both chip and NFC have floated up from the depths and sunk any number of times.

    I agree with the author of the article. Unless consumer behavior drives it (and that behavior is currently brand-controlled by the associations, and is solidly magstripe) no big merchant is really going to care. The last payment “innovation” (if you can call it that) they jumped on was closed-loop prepaid. That seriously drove revenue and came with breakage as an added perq.

    C’mon folks, what’s going to break the chicken and the egg deadlock? PayPal? Mobile? Really? Anyone want to bet on either of these horses in the US?

  3. Eddie Says:

    John Donahoe is a visionary leader. By any means it is not an easy task to learn and steer a very large organization like eBay. He is going a great job! When John speaks everyone listens and appreciates his thoughts.

  4. Ric Says:

    With Visa, Master Card, American Express, banks and Google all expected to offer mobile payment products over the next few years, Mr Donahoe’s statements regarding PayPal mobile hardly go beyond action.

    What Mr Donahoe is doing is trying to influence the marketplace before the marketplace has an opportunity to test drive competing products.

    Mr Donahoe may impress retailers, but impressing consumers who have had miserable experiences with PayPal in the past is not likely to happen.

    PayPal has been and still is engaged in practices which infuriate their customers such as placing arbitrary holds on payments received by sellers on and off eBay. The numbers of sellers effected by this ongoing payment hold processes grows quarterly, as if PayPal is headed towards becoming an escrow service, instead of being a payment service.

    Tens of thousands of sellers have been hit with these arbitrary holds and alienated to the point that they have stopped doing business with eBay AND with PayPal.

    If Mr Donahoe believes that consumers that have been antagonized to the point of closing their accounts because of poorly thought out company policies are going to suddenly accept PayPal back into their lives with open arms simply because PayPal might be accepted at Target or WalMart, he has much to learn.


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