SAN FRANCISCO -- PayPal brought its digital wallet solutions to eBay's Innovate Developer Conference 2011 this week. The show itself is dedicated to the new X.commerce open platform.
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A big focus for this platform is mobile payments, a hot topic that has many commerce companies, retailers, and developers scrambling to figure out how to meet this trend.
One feature that has largely been absent from the X.commerce show so far: NFC. There has been a lot of buzz this year that near field communications technology as the key to mobile payments.
This isn't to say that PayPal is ignoring NFC. In fact, PayPal introduced a peer-to-peer payments solution for Android devices this past summer.
But maybe NFC really isn't the key after all -- or at least not for now.
During a panel discussion at GigaOM Mobilize 2011 in September, Laura Chambers, senior director of PayPal Mobile, acknowledged that NFC is a “great technology,” but mobile payments is already happening really quickly. Thus, PayPal isn’t waiting around for three to five years for that medium to grow.
“We found that it’s important to have a solution that is broad and flexible,” Chambers said, adding that “trying to push something new on to them was not going to work.”
A few weeks ago, PayPal gave a sneak peek of its virtual wallet offering. While it was definitely intriguing during an in-person demo at the Innovate show, it didn't feel very mobile -- at least in the terms we're all expecting, such as being able to pay with a smartphone and nothing else required.
The mobile part is based upon several other eBay subsidiaries, such as RedLaser and Where. In the case of RedLaser, the mobile part of the payments process is better emphasized with the integration of PayPal Access, a simplified way to make payments tied to a person's PayPal account.
With the location-based Where app, users can, for example, place an order at a local cafe before arriving, and the receipt will be delivered back to the consumers on the app itself.
However, in this case, the payment process itself is not mobile. Instead, it's another card, and this one is just one issued by PayPal. At first, this doesn't seem very innovative. But it actually is quite different from anything we've seen before.
Here's the basic rundown: PayPal issues a card to the user. It looks like a regular credit card, except there is no name or number on the card. There is still a signature space on the flip side along with a swipe strip. To use the card, the customer must enter a unique pin number connected to the card.
This is where the fun part comes in. That card can be connected to all of the user's financial accounts (or at least the ones you can make purchases with). So that means debit and credit cards, a bank account, and even gift cards. So instead of having to carry around all your credit cards, you could just use this one.
When making a payment, the charge will either automatically debit from the applicable gift card or it will be assigned to the default payment method assigned by the user online. The merchant gets paid up front by PayPal, but the user has up to 14 days to change which payment method they want to use. (The alternative to the card is using a phone number attached to the account, plus the pin, but the concept and payment structure remains the same.)
That system will be going into pilot mode in early 2012.
While that's certainly unique and it's tied to a lot of other mobile functions, the payments process with this particular product is still not mobile -- at least not in the way that most people have been discussing the topic in the last year. Are mobile payments defined by a chip on a phone? Or does a RedLaser barcode scan do the same job?
This could represent an intersection for PayPal. On the one hand, it seems to be waiting for NFC and other mobile payment technology forms to take off instead of wasting time and resources on something that most analysts can agree on just isn't ready yet. Only a handful of smartphones are even going to have NFC in the next few months, and very few merchants nationwide will welcome them.
Although one could also argue that PayPal is not being as innovative as it could be in this arena by resting on apps that focus more on improving mobile shopping rather than actual buying, thus perhaps missing the boat on a huge market.