Bloomberg News

PayPal Eliminates Need for Phone or Card in Retail Purchases

September 09, 2013

EBay Inc. (EBAY:US)’s PayPal unit has a message for its 132 million users: put away your phones.

The digital payments provider introduced technology today that lets consumers enter a store and pay without touching a credit card or smartphone. Retailers can plug a new device, called Beacon, into a power outlet and detect phones that have the PayPal application, sending a notification to the cashier.

PayPal and challengers Square Inc., Visa Inc. (V:US) and Intuit Inc. (INTU:US) are rushing to help merchants install swipe-free payment options to cut down on transaction time while also allowing retailers to collect data on their customers. At stake is a mobile-payments market that’s estimated to surge to $90 billion in 2017 from $12.8 billion last year, according to Forrester Research Inc. (FORR:US)

“Our goal is not to make money on the hardware -- it’s to cast a really wide net,” PayPal President David Marcus said in an interview. “We’ve partnered with almost every point-of-sale manufacturer. We have really wide coverage now.”

Marcus, who took the helm at PayPal last year, said he intends to sell Beacon devices for less than $100. He introduced the product today at the TechCrunch Disrupt conference in San Francisco.

Beacon emits a low-energy Bluetooth signal, which recognizes a customer’s PayPal app even if the phone has no cellular or WiFi signal, a typical problem in department stores with thick brick walls. When a customer is making a purchase, the cashier already knows who the person is and automatically charges the PayPal account even if the PayPal app isn’t running.

Beacon is compatible with payment terminals from companies including NCR Corp. (NCR:US), Micros Systems Inc. and Shopkeep.com Inc., PayPal said.

NFC Problems

Google Inc. and mobile carriers such as AT&T Inc. (T:US) and Verizon Wireless have tested near-field communication technology, which lets users pay by touching a smartphone to a credit-card terminal. That method has been criticized for being just as inconvenient as a credit-card swipe.

Marcus is seeking to improve upon technology PayPal already has, which requires pulling out a mobile phone at some point during the payment process or typing account information into a terminal.

The San Jose, California-based company began installing software on credit-card terminals at retailers like Home Depot Inc. (HD:US) last year, offering the option to pay with a name and PIN number instead of swiping a card. PayPal’s mobile app currently lets users pay by name after pulling out a phone, opening the app and checking into the store.

New App

PayPal updated its app last week to let users pay a bill at a restaurant without flagging down a server. It also teamed up with Eat24.com LLC, adding the ability to order ahead at nearby restaurants.

Beacon is coming to market as retailers and payment companies aim to detect when customers are nearby so they can push out relevant offers.

“It’s our most significant contribution to date to the changing behavior of point of sale,” Marcus said.

Beacon is PayPal’s second piece of hardware rolled out under Marcus. Shortly after he took over, the company introduced PayPal Here, a card swiper that plugs into a mobile phone and charges merchants a flat rate of 2.7 percent. The device competes with similar products from Intuit and Square, though PayPal hasn’t said how much it’s adding to its $20 billion in projected mobile payment volume this year.

Payments accounted for about 38 percent of EBay’s $3.88 billion in second-quarter revenue (EBAY:US).

To contact the reporter on this story: Danielle Kucera in San Francisco at dkucera6@bloomberg.net

To contact the editor responsible for this story: Pui-Wing Tam at ptam13@bloomberg.net


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Companies Mentioned

  • EBAY
    (eBay Inc)
    • $52.4 USD
    • -0.30
    • -0.57%
  • V
    (Visa Inc)
    • $216.25 USD
    • -0.19
    • -0.09%
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