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PayPal launches credit card reader in Australia, Hong Kong

update Payments company launches PayPal Here service in Asian markets as part of worldwide rollout to help SMBs gain access to mobile payments processing capabilities, but analyst says challenges such as consumer buy-in persists.
Written by Liau Yun Qing, Contributor

update PayPal has launched a mobile credit card reader in the Australia and Hong Kong markets and will extend the service to other parts of the region in future, says company executive, who believes the service will help boost small businesses in region.

Rupert Keeley, senior vice president of Asia-Pacific at PayPal, said in a phone interview with ZDNet Asia on Friday, that the service called PayPal Here is currently available for merchants in Australia and Hong Kong. The company will expand the service to other parts of the region, he said, but did not elaborate on when or where.

The PayPal Here service allows small businesses to accept multiple forms of payments, including credit cards and PayPal fund transfers, using a mobile app and a fully-encrypted, thumb-sized card reader, he noted. The company statement noted that the card reader and Apple iOS app were currently available but the Android app would be released in the future.

Keeley believed that the service will benefit the over 150 million small and midsize businesses (SMBs) in the Asia-Pacific region. He explained that these businesses wished to accept credit card payments offline but were not able to as banks were unwilling to distribute payments terminals to them as it was not economically feasible.

Merchants can apply online to receive a dongle using their PayPal accounts. Once they have received the reader, they will need to download a merchant app and validate their accounts, he said. The validation will only take about 24 hours before the merchant can start processing transactions, he added.

User, merchant adoption challenges for PayPal
However, the online payments company's latest foray into mobile payments is not without a few challenges, according to Jayesh Easwaramony, vice president of ICT practice for Asia-Pacific at Frost & Sullivan. He pointed out that the biggest challenge will be marketing the service and ensuring good user experience for merchants.

Retailers will need to be convinced of the business case of adding another payments method to existing ones, he explained, adding that "cash is still king" for smaller transactions in some markets.

Keeley acknowledged that cash is indeed king for some markets, but he believes electronic payments, especially via credit cards, are increasing and its PayPal Here service will benefit both users and merchants.

Easwaramony also noted that PayPal will need to work on increasing its user base in the region. "From the user side, the number of PayPal accounts in Asia-Pacific is still a small percentage of the addressable market," he said.

The PayPal executive said there are about 8 million active PayPal users in Asia-Pacific by end-2011. By contrast, the company has more than 100 million active users worldwide at the end of June 2011.

That said, Keeley thinks the size of PayPal's user base in the region will not be a challenge to the adoption of its service. This is because users need not have PayPal accounts to use PayPal Here, he said.

Easwaramony qualified his concerns over PayPal's service by saying that he believes mobile credit card reader services, in general, have the potential to succeed, but consumer fears must be addressed.

Once the consumer fear chasm is crossed, Easwaramony pointed to factors such as the increased adoption of smartphones, the integration of discount coupons, and the enhanced user experience that will drive adoption of such payments system.

Singapore competitor unfazed
One Singapore-based startup, which provides a similar service to PayPal Here, was not worried about the U.S. competitor's entry into the region's mobile credit card payments market. This is because both providers target different market segments, said Etienne Van den Bogaert, COO at SCCP Payment Services.

He said while PayPal and U.S.-based Square target smaller merchants with their services, SCCP's Swiff product is aimed at meeting "the needs of the entire ecosystem of industry players in this space".

The COO added: "Swiff works alongside acquiring banks and acquirers. As a payments enabler, we facilitate banks or financial institutions with their mobile strategy directly, thus providing the merchant and banks end-to-end security and direct access to customers."

SCCP's Swiff is a mobile point-of-sales (POS) platform that allows merchants to process credit card payments using its dongle. The service is supported on iOS devices, certain Google Android-enabled mobile phones and tablets, as well as selected BlackBerry smartphones, its Web site stated.

Additionally, its POS service is an open platform that allows third-party developers and small-scale mobile developers access to customize their products, the executive said.

Van den Bogaert did not share the number of companies already using Swiff, but he noted the company has seen "positive response" since Swiff was launched in 2011.

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