Part 3/3: Apple, Samsung, PayPal – the smart money’s on instore mobile payments but who will win?


In store mobile payments have a way to go when it comes to consumer acceptance. Yet according to market research by Carlisle & Gallagher Consulting Group, within five years, half of today’s smartphone users will be using mobile wallets as their preferred payments method.  Leading the charge in this payment revolution has been PayPal, one of the founders of web enabled commerce.

PayPal – First mover advantage, but point-of-sale approach makes reaching critical mass difficult

In the absence of widespread merchant acceptance of NFC technology and NFC enabled smart phones, when PayPal launched their first Australian in store mobile payments technology in 2012 they had to think a little outside of the box.  Bypassing the eftpos device entirely, PayPal created direct connections between PayPal smartphone app users and the retailers point-of-sale.  Left your wallet at home but fancy a coffee?  No problem said PayPal.  Simply search through their app for a PayPal accepting merchant near you, ‘check-in’ once you’d arrived and tell the cashier you were paying by PayPal.  The cashier would glance down at their point-of-sale screen, find your ‘face’, which had appeared post check-in, and confirm your payment.  No wallet, no cards but most importantly, no eftpos terminal.

So while merchants didn’t have to upgrade their hardware, the achilles heel of PayPal’s strategy was that in order for a merchant to start accepting PayPal, their point-of-sale vendor had to do some development work at the backend to turn on the new payment type.  And if you’ve ever worked in a development house, you’ll now just how difficult it is to get any work prioritised without the promise of a juicy carrot almost immediately.  With in store mobile payments still an unknown quantity many point-of-sale vendors reasonably questioned whether adding this new functionality would create significant uplift in their bread and butter – number of point-of-sale units sold.  So while PayPal were able to convince some vendors to start accepting PayPal, the fragmented world of point-of-sale systems meant reaching critical mass was and still is an issue.

Despite this, what I like about PayPal’s approach is that it takes us one step further in our use of mobile payments as consumers.  With Apple Pay and Samsung (or any NFC enabled phone) it bugs me slightly that I still have to get my self physically to the eftpos terminal in the store to pay.  That doesn’t solve the most pressing problem in store and the one which arguably results in the highest degree of customer churn – the dreaded queue.  PayPal’s approach could be used by retailers to tackle this in novel ways.  Imagine you walk into a busy bar.  The serving area is packed so you ‘check-in’ and slip your phone back into your pocket.  Next thing you’ve ordered your drinks and you simply tell the cashier you’re paying with PayPal.  They confirm and away you go.  No mucking around entering payment amounts into eftpos terminals, no navigating your way down to the end of the bar to the one cord connected terminal.

With Apple Pay heading consumers way in a big fashion, retailers will to some extent be forced to start thinking about mobile payments.  The smart ones will start looking for something that addresses the problems NFC enabled smartphones haven’t solved.  That is, how can they use this new technology to enhance and better personalise the in store shopping experience.  If PayPal can garner more widespread consumer acceptance, coupled with merchant awareness about how the technology could be leveraged then they may still gain a foothold in the in store mobile payments market.  But time is running out and some serious competitors are biting at their heels.

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