Paypal has entered the online payments market from the merchant side in competition with Google and Square. By Ian Scales.
Paypal, the payments arm of the now doughty old Internet auction site, eBay, has introduced a mobile credit card reader and a business model aimed at the small merchant/restaurant end of the online payments market. In doing so it's put itself into direct competition with Square and Google Wallet which are also focusing on the merchant end of the mobile cash market. Like them it's rightly worked out that it's the entity offering the bill, not the customer offering the card, who owns the complexity in the transaction.
So the merchant has the most to gain by the introduction of new online technology.
Essentially, the Paypal system offers a smartphone equivalent of a fully-functioning POS terminal (or cash register) at a fraction the price - just the thing for a small but growing enterprise.
The Paypal unit is described as a small triangular credit card reader which plugs into the audio socket of an iPhone, controlled by an app. An Android equivalent is soon to follow.
It will, of course, face lots of competition. Earlier this month, Square introduced Square Register, which is more or less the same idea enhancing its own reader (introduced in 2010). Register has a free analytics system (smoothing that complexity) and integration with Square’s smartphone-based mobile payment app. Google has Google Wallet, of course, and a plethora of banks and credit card companies are all eyeing or already entering the space.
On the face of it, though, Paypal is well-positioned to make this move. As part of eBay it already has 100 million customers, has pioneered online payments since the late 1990s and - given the nature of the auction site - is well-versed in the requirements of both online buyers and sellers. As eBay has evolved its business model the site has become a merchant platform (in a similar way to Amazon) complete with eBay online shops and Paypal has benefited. As a result Paypal already has everything in place to expand into this side of the market
The Paypal reader is provided free and Paypal takes a payments cut.
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