PayPal’s ambitions are clearly impressive.
One of their goals is to become such an accepted everyday form of payment that instead of offering up your Visa card or Mastercard at a till, you will opt to use your PayPal account. And most likely you will do it by swiping your phone across a reader.
This plan to grab a share of the reported $2.4 trillion market dominated by credit card companies, surely underlines the self confident air of a company that has already changed the way people pay for things over the internet in its 12 short years.
Its big success was of course helping buyers and sellers on eBay conduct financial transactions easily and securely.
“We started on eBay and ventured into off eBay businesses but it was all e-commerce and that was where our focus was,” said PayPal president Scott Thompson, who formerly worked for Visa.
“Now the focus is not just e-commerce, it is online transactions. What fits into that that wasn’t in there before is everything from payments to not for profits, charities and government agencies and even, in my case, my son’s school accepts PayPal. Those are just some useful cases for you as a consumer and it just keeps going and going.”
Mr Thompson believes as more and more devices become connected to the internet, they also become payment vehicles. This includes everything from the TV to the cellphone and from a dvd player to a car.
“These new point of sale devices are about being at the end of a network and you being able to connect and any payments occasions in there are best suited for us. Eventually we [PayPal] will be everywhere that is online.
“If you are a customer of ours you should be able to use us anywhere on the internet and around the world.”
More specifically, Mr Thompson said PayPal’s future strategy going forward is simple.
“Where are we going next is anything that is mobile, anything that is digital and lots and lots of e-commerce online payments.”
When Mr Thompson says “lots and lots” he means hundreds of millions. At the moment PayPal has 87m active customers and 8m active merchants. He noted that while there are over 1bn people online, there is something like 5bn cell phones in the world.
The new offerings include smartphone applications, partnerships with Facebook and Google, micropayment solutions and a number of third parties that have integrated PayPal into their applications. Reports abound that the firm is also in talks to embed its payments platform on Android, Google’s mobile operating system.
A major priority is to turn phones and connected devices into “digital wallets” that can be used by shoppers to buy merchandise, collect coupons, and store loyalty program information using electronic funds. The software is to be introduced by PayPal at their developer conference in October.
Another big play for the company is micro-payments. All those 25 cents and $1 transactions add up to lots of profit.
“This is going to be big, really big for us,” said Mr Thompson.
“I believe what is happening here is the subscription based economy where I want to pay for it when I use it. I want to pay for it when I consume it. And I only want to pay for what I use, not pay for 100 of something and use 10.
“This is going to lower the overall transaction size but there are going to be millions and millions more transactions. And if we are the most convenient and most secure way of doing that, you won’t do tens of transactions with us over the course of the year, you will do thousands of transactions but they will be much smaller.”
One example of that “pay for what you use scenario” is easily illustrated when you think of parking said Mr Thompson.
“At the moment you pull up to a parking meter and put all this money in and worry about ‘Oh I put in too much and I don’t use it or get the value or I didn’t put in enough and I get a traffic violation’.
“Why not when the car pulls up to the meter, because it is a connected device, it clocks in and when you pull it out it knows how much you owe. You have that money exchange with the automobile through your PayPal account embedded and capable of paying that transaction. Think of all the useful cases where that will happen, all those small transactions.”
Visa also agrees micropayments offer a lucrative future. At a recent technology conference called Techonomy Visa’s North America president Bill Sheedy was understated in his assessment.
“When we look at micro transactions, we see that as a growth area.”
PayPal’s Mr Thompson believes the company’s ability to grab market share from established players is down to their approach which puts technology at the heart of everything.
“The secret sauce of PayPal? Strip it all away and what do we do that no-one else does is risk and fraud management and its completely proprietary and it is all tech based.
“If you wandered around to a lot of legacy companies or those that have been around for a long time. When you talk about technology, they view it as a cost to the business. ‘Yeah we have a few of those tech guys around and they cost us a lot of money’ or they outsource it.
“We would never do that. This is the life blood of what we do. Every great disruptive innovation that we have seen and done has been through the use of software and technology.”
Mr Thompson asserts technology has enabled the company to remain flexible and nimble to customer demands and it is what will ensure its future as it continues to take on the established players in the game and perhaps even change the rules of the game:
“We are big today but I would tell you that we are more innovative today than in the last five years. It is through innovation we will be more disruptive moving forward.
“Where we are in the growth of this business is we are just getting started. This is year one again.”
