Not many companies are doubling their business estimates for the next year, but PayPal has done just that by projecting a 100 percent upside for mobile payments. It pushed the gas even harder this week by saying it plans to offer near-field communications-based mobile payments. Near-field communications is a short-range wireless connectivity standard that enable communication between devices that are brought within a few centimeters of each other.
PayPal's new technology was demonstrated Wednesday at the MobileBeat 2011 conference in San Francisco by Laura Chambers, PayPal’s senior director of mobile. An NFC Android widget will be used to transfer money between PayPal accounts by tapping together two Nexus S phones. Chambers told attendees the widget should be available later this summer.
The Nexus S is the only phone the service will run on at this point, mostly because it’s the only NFC enabled mobile phone. But that’s expected to change as more NFC-enabled phones hit the market over the next year or so. PayPal’s using Google’s Android NFC software development kit, which should make it easy for PayPal to make its NFC technology compatible with new NFC phones that come out over the next year.
The cash transfers are secured by PayPal’s peer-to-peer specification. That means the transaction is executed by an encrypted token, and doesn’t touch the NFC secure element—which stores card and other sensitive information.
PayPal had offered mobile payments for some time via apps, but the ramifications of adding NFC at PayPal are huge, opening up the possibility of the eBay subsidiary expanding deeper into mobile payments and treading into added services—making the firm an even more formidable competitor to banks.
The eBay subsidiary’s pushing mobile technology on a variety of fronts. eBay recently acquired Zong—a tech firm that allows users to charge digital goods to wireless phone bills. PayPal’s moves also pose a threat to other major efforts to develop mobile payments, most notably clearXchange, the Wells Fargo/Chase/Bank of America P2P venture that will also heavily rely on mobile technology. By offering NFC, which adds another way for PayPal to use mobile P2P as a gateway to other mobile services, such as remittance, EBP&P, POS payments and check deposit, the eBay sub can eat away at some of the touted advantages of clearXchange, such as pre-existing financial relationships.
A PayPal spokesperson on Thursday said PayPal would make its POS clear later this year, and added consumers could choose to access the digital wallet across multiple devices and use cases.
In an interview last week with BTN for an upcoming special report on broader mobile trends at PayPal and other firms, Dan Schatt, general manager of financial innovation at PayPal, said “The mobile transaction can be monetized in a lot of ways. Every single transaction [results] in the recipient getting an email from someone… You have more of an opportunity to get in front of a consumer [for cross selling] than ever before.”
Commenting on PayPal’s potential expansion into added financial services, Aite senior analyst Rick Oglesby said, “Let’s assume PayPal gets accepted at the POS, and it has P2P and the web. Consumers could do a direct deposit into a PayPal account, so banks lose their [pre-existing account] advantage.”
But Beth Robertson, director of payments research for Javelin, on Wednesday afternoon said PayPal does have some more work to do if it plans to offer POS mobile payments. “[The new NFC rollout] shows that they are working with technology [NFC] that can be brought to POS, but PayPal does not have a strong POS market position presently and that application, as described, does not appear to support most POS needs.
