After long belittling near-field communication technology by joking that its acronym, NFC, stands for “Not for Commerce,” PayPal Inc. before the end of the year will launch a new version of its mobile wallet featuring the technology.
PayPal, which has been working with NFC in Australia, will replace its current digital wallet, an app that has been in the market for about 18 months and that has become one of the most popular in the market.
“We’re bringing the NFC application from Australia later this year,” Brad Brodigan, vice president and general manager for retail at San Jose, Calif.-based PayPal, tells Digital Transactions News. “We’re really focused on NFC.” Brodigan would not be more specific about the timing of the introduction, though he added in an earlier presentation that PayPal also plans to introduce a card with an NFC chip later in the year.
PayPal’s current mobile app works as a native app as well as a payment application within other apps, such as the popular Uber car service. The company also allows users to pay at the point of sale by entering a PIN and a mobile number on a terminal at an undisclosed number of locations. Brodigan says this method does not account for a substantial number of transactions.
PayPal clearly hopes NFC, which enables contactless transactions at enabled POS terminals, will breathe new life into its effort to penetrate the physical point of sale, a strategy that began unfolding in 2012. “The last three years has been a lot of testing and learning,” Brodigan said during his presentation, delivered Wednesday at the Electronic Transactions Association’s Transact 15 payments-technology conference in San Francisco. “Our path forward is clear. Offline for us is mission critical.”
NFC’s value for PayPal lies in its ability to complement payments with offers and loyalty programs while drastically reducing transaction time. This appeals to consumers so strongly that the “tap-and-go” method becomes “habitual” for them, Brodigan told the audience of acquirers and payments-technology managers. “It’s so easy, easier than cash and cards,” he said. “The tap-and-go process is just the start of driving mobile-payments adoption.”
Brodigan told Digital Transactions News the new NFC-based app will cut anywhere from one to four steps out of the current app’s transaction process, smoothing out the user experience.
He told the audience that enabling NFC broadly at merchants requires working closely with acquirers. “We’ve been focused on building our partner network,” Brodigan said.
PayPal has been making arrangements with independent sales organizations and merchant processors for several years, and now has deals with more than 60. This number, however, does not include First Data Corp., a major processor that in 2013 told acquirers it would block PayPal transactions at physical merchants after PayPal arranged to route new card-based payments on Discover Financial Services’ network.
PayPal’s decision to adopt NFC comes years after John Donahoe, chief executive of PayPal’s parent company, eBay Inc., famously dismissed it with the “Not for Commerce” jibe. However, by last fall his assessment had changed dramatically. In an October earnings call, he predicted NFC would achieve “widespread adoption” in the U.S. within one to three years, faster than a former three-to-five year projection. Ebay plans to spin off PayPal as an independent company later this year.
PayPal’s mobile wallet has enjoyed wide adoption relative to competing offerings from other companies, including online-search giant Google Inc. In 2014, its mobile volume climbed 70%, from $27 billion to $46 billion, partly on the strength of strong showings by its Braintree and Venmo mobile applications. For the year, mobile accounted for fully one-fifth of PayPal’s total dollar volume. “PayPal is the number-one most recognized and used digital wallet,” Brodigan said.
But PayPal and others face stiff competition from Apple Inc.’s Apple Pay wallet, which after nearly six months in the market is proving popular with iPhone users and also relies on NFC. And this summer major merchants belonging to the fledgling Merchant Customer Exchange are expected to launch a mobile effort called CurrentC, which will feature loyalty and rewards alongside payments.
Brodigan says that while PayPal will introduce NFC, it won’t rely on that technology alone. It will also support quick-response (QR) codes, for example, which also enable a tap-and-go experience at the point of sale. Last month, PayPal agreed to buy QR-based mobile-payments specialist Paydiant Inc., though the transaction has not yet closed and it remains unclear how Paydiant might play a role in PayPal’s new mobile strategy.
“We’re not single-threaded on QR, NFC, or card,” Brodigan remarked during his presentation.