PayPal adds a fourth datacenter as it expands into the non-virtual world

PayPal’s secure datacenter operations grow to support brick & mortar

PayPal has added a fourth datacenter to its operations network in response to what the company president described  as a need for more machines, more capacity and more bandwidth to meet the rapidly growing needs of the business. Given the rate at which eBay has ben expanding their datacenters, it is unsurprising that PayPal, now owned by eBay and their primary payment processor, needs to grow along with them.

But it’s not as simple as that. Responding to the success of payment processor Square, PayPal is also hoping to expand into the brick and mortar space, where they say that they hope to have over 2 million retail locations making use of their mobile device based payment service by the end of the year.

Like Square and some more traditional processors who are now getting into the market, PayPal hopes to convince them to move to a smartphone based payment system where the eventual goal is to do away with the traditional credit card swipe and allow for both payment and payment acceptance to be handled by an application on your smartphone.

At the end of Q1 this year, PayPal President David Marcus told investor that they have the potential to double the size of their business over the next three years. Adding an additional 33% capacity to their datacenter backend is certainly necessary if they want to support that growth and the bursty nature of credit card processing.

If PayPal is successful making the transition from an e-commerce payment processor to a successful player in brick & mortar, they would be likely to need additional capacity in their backend. Despite the cries of many that traditional retail is dead, Q1 2013 ecommerce sales were only reported at just over $50 billion.  Consider that in light of the US Commerce Department report that the $225 billion in e-commerce sales in the US in 2012 represented only 5% of the total retail spending last year.  This should give you some idea of the potential for growth for PayPal as they move beyond just e-commerce.