PayPal Holdings Inc. has made big plays for the physical point of sale before, but late in July the San Jose, Calif.-based company unveiled what could be its biggest strategy yet to capture transactions at the cash register.
Top executives said an arrangement under way with CVS Pharmacy to run PayPal and Venmo transactions on Quick Response (QR) codes will roll out to all 8,000 CVS stores by the end of the year. Already, PayPal has deployed QR codes for payments in some 28 countries, chief executive Dan Schulman told equity analysts on a conference call.
The move comes as the months-old coronavirus pandemic has left hordes of consumers wary of touching payment cards or keypads. Such widespread caution has opened an opportunity for rapid development of a QR strategy as part of the PayPal wallet, Schulman said. “QR codes are a key strategic priority for us,” he told the analysts. “It’s critical for driving daily use. We will make the investments we have to.”
Besides CVS, PayPal is working with more than 100 “enterprise” merchants in the U.S. and European markets to introduce acceptance of QR codes for payment, Schulman said. The effort includes talks with payment networks and terminal providers “to distribute our QR codes,” he added. “It’s not just about touchless payment, it’s rewards, offers, messaging. We think the economics over the medium term are quite positive for us.”
The thrust for QR code capability follows an initiative PayPal launched in May to bring the technology to small-scale sellers as part of its mobile app. The company at the time attributed the move to consumer and business fears of infection in the midst of the pandemic.
QR codes have proven quite popular in markets like China, where the big mobile-payments services Alipay and WeChat Pay depend on them. In these deployments, as well as in the PayPal program for small merchants, sellers display the code for buyers to scan with their smart phone. The scan triggers the transaction and movement of funds to the seller’s account.
But the codes haven’t gained a foothold in the U.S. beyond efforts to equip popular American chains to serve Chinese tourists. Other major companies, though, may be seeing potential. Apple Inc. reportedly was testing QR codes for Apple Pay earlier this month, for example.
PayPal has not discussed how it will price QR code transactions for big chains like CVS. It hasn’t been so reticent when it comes to small sellers. In its May announcement, the company said these merchants would pay 1.9% plus a dime per transaction after the expiration at the end of July of an introductory free period.
For the first 14 years of its existence, PayPal stuck with its online-only payments service. But in 2012 the company began to enlist physical merchants as it hoped to tap into the much larger market for point-of-sale transactions.
At the time, PayPal was still part of eBay Inc. But eBay spun off PayPal to public ownership in 2015. That same year, PayPal said it planned a renewed POS thrust with near-field communication technology in its digital wallet. Unlike QR codes, NFC links to point-of-sale readers with very short-range radio waves.
Now, as it embarks on its latest POS gambit, PayPal is registering impressive results despite a pandemic that is wrecking many world economies. Indeed, by the end of June it had enjoyed what it called the “strongest” quarter in its 22-year history.
Active accounts reached 346
million, up 21% year-over-year, including 26 million merchant accounts. This total also includes 21.3 million net new active accounts, up fully 137%. Payment volume totaled $222 billion, exceeding the year-ago number by 30% on a foreign-exchange-neutral basis, and topping $200 billion for the first time in the company’s history. Revenue reached $5.26 billion, a 25% year-over-year increase on an FX-neutral basis.
Venmo, PayPal’s popular peer-to-peer payments service, ended the quarter with more than 60 million active accounts. Its volume totaled $37 billion, up 52% as users turned to the product to move money to each other in the face of the pandemic.