Daily Dose of iQ: PayPal at Home Depot; Boku's Three-Pronged Approach

Feb 23, 2012 — Garett Rogers

Yesterday, The Financial Post reported that PayPal's recent point-of-sale payment partnership with Home Depot has begun, with about 50 stores in the Bay Area adopting the technology.

And then today, All Things Digital published an article about San Francisco-based Boku, whose mobile payment technology takes a similar approach to that of PayPal, but operates on three functions: 1. mobile payment via smartphone (like PayPal), 2. customer loyalty (coupons for Boku users), and 3. an NFC sticker (in partnership with MasterCard PayPass).

PayPal and Boku aren't the only online payment processors trying to get into the brick-and-mortar POS game, but they do have advantages over the other parties* trying to make inroads in the space.

Online payment processors have a whole bunch of stored credit card information for users -- so they can provide a service that feels more secure in the sense that you don't have to give anybody your physical credit card. In order to use your PayPal account, you would have to provide some form of authentication -- credit cards have traditionally had problems with that.

*Other parties meaning: carriers, OEMs, credit card companies and banks.

It's yet to be seen how PayPal's integration into physical retail environments, in Home Depot or other subsequent stores, will play out.

It's likely that if a user has the option to pay by credit, debit, cash, or PayPal, it is more likely that a user will decide to use something they are familiar with.

That said, launching an alternative payment method is almost like launching a new web browser -- existing players have 100% of the market share. As an alternative, your hope is to gain market share over time, and hopefully one day be the method of choice. Having a partner like Home Depot is a good start, but there is still a long way to go to make PayPal mainstream in the traditional, physical retail world.

We’ve discussed how the whole mobile payment/wallet phone concept has yet to take root among consumers. Some argue we're 3-5 years out from this becoming mainstream. (See Google Wallet.)

Mobile payment is a cool concept, but to me it almost feels forced.

My mom isn't going to be doing mobile payment any time soon -- she will be paying cash and swiping cards until they go away completely. Those methods of payment are so mainstream that you don't even have to think about whether or not they will be accepted by a retailer. That assumption is what mobile payment needs to become in order for the average consumer to use it. Eventually, every retailer will need to adopt a new payment method at once (by purchasing new hardware, and doing the necessary software integration).

It's safe to estimate that mainstream adoption is at least 3 years out... if not more.

Topics: Privacy, Retail Operations, Wireless Trends, Mobile Industry

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