PayPal is all about online, but then you knew that already (Part 2)
The person-to-person origins of PayPal have, in a way, been re-interpreted through Venmo.
This added a social component to inter-personal transfers and found immediate success. For the debit-card generation, Venmo provides an enhanced debit experience that they seem to find most appealing.
“Venmo is growing by leaps and bounds. Last quarter, it processed $1.6 billion in transaction volume, and that was up 247% year-over-year [from the previous quarter.] Our strategy is to provide even more value to users and tie the Venmo community into the PayPal merchant marketplace so that they can use Venmo to buy things.”
Finally, PayPal has been very active when it comes to acquisitions over the last couple of years and these look like providing a solid foundation for life as an independent payment system. They spent $890 million on Xoom so that they could cross sell Xoom’s services to their US customers and expand their presence in markets such as China and Brazil where Xoom has strong presence; they spent something in the region of $300 million to acquire the mobile wallet provider Paydiant; and they spent $800m to acquire Braintree, an API-focused payment gateway that provides online payment services the merchants. The acquisition of Braintree was, I think, especially important.
“Braintree’s payment gateway helps businesses quickly and easily accept credit cards online. The technology takes care of processing transactions, securely storing customer data, accepting payments internationally, recurring billing, and so on, so merchants can focus on front-facing issues. It introduced Venmo Touch in limited beta earlier this year, which enables consumers to save credit card details on their iPhone so they can pay with one-tap across all Braintree powered apps.”
I’ve bored people to tears with my “wallet is an API, not an app” talk so I”m going to have to add the new category of “unwallet” to my client presentation on the wallet roadmaps, to mean an API-based third party service that cloud-consolidates payment information for retailer apps, many of which will of course use Paydiant to access that API. They’ve been developing this approach for a couple of years.
“Called Venmo Touch, the service is Braintree’s take on a one-touch payments service that works across multiple iOS apps. Customers enter their debit or credit card details once, for instance on HotelTonight’s app. That info is securely stored and automatically populated into any other app using the Venmo Touch network.”
But the world of secure and convenient online payments is no longer the safe space for PayPal, where it could chuckle in the face of 3D Secure and continue to ride the online commerce wave while experimenting at physical POS. POS has gone EMV and NFC, chip and contactless, and Apple Pay’s mindshare has cemented into place the architecture: strong authentication against a revocable token stored in tamper-resistant hardware. Having decided that NFC had no future a couple of years ago, PayPal is now making an effort to catch up again.
“With PayPal’s mobile payments transactions volume increasing 40 percent year-over-year, the business is testing NFC payments prior to its imminent split from eBay, executives revealed this week.”
So, with Apple, Google, Samsung and others gunning for them in this world, what can they do? Well, yes, PayPal have not been terribly successfully at extending their franchise from online to offline, although I personally rather like PayPal Here as must be evident from the image earlier, but as I have said countless times before, it doesn’t matter. The future is about #appandpay, not #tapandpay and this must be, if I am reading the tea leaves correctly, where PayPal must strike. In Karen Webster’s excellent overview of PayPal’s horizons she said that “the payments problem to crack isn’t offline where cards work well and just about everywhere in the developed world, but online and via mobile where using card products is a real pain”. She goes on to say that:
“But the competitors that I’d pop to the top of PayPal’s worry list aren’t Apple and Google and their “Pay” schemes, but Amazon and Alipay.”
PayPal needs to build a better proposition in order to compete with these guys. And they can! With Braintree, Paydiant and Xoom (and their expertise in APIs) they can provide a flexible and open alternative to Apple Pay et al. A stable of retailers using Braintree to accept payments from apps using the Paydiant wallet to manage not only payments but loyalty, coupons, receipts and so on could form an attractive nexus for mass market consumers who expect to use their phone to pay in store, via the web and on the phone all in exactly the same way.
* Mind you, three-quarters of European bank executives claimed that their bank has a strategic programme at board level to take advantage of PSD2, which sounds on the high side to me.