March 10, 2011
Today’s Bloomberg Article announces that PayPal has hired former Blackhawk CEO Don Kingsborough to run their physical POS expansion efforts. I like PayPal’s chances here for following reasons:
- 3 Party payment Network. They can set rules and develop innovation in a 2 year cycle vs a 10 year cycle (Visa/MA). Perhaps this is why Chase’s Card CEO said he saw Discover as an opportunity.
- PayPal’s experience online, allowed them to build some critical competencies. Online is the “tip of the spear” in fraud, the most complex “real time” analytics intensive war game on the planet. While fraud at POS is different, PayPal has the fraud team equivalent of “navy seals”.. .can they drive tanks? Not yet, but give them a few days.
- Innovation and alliances. Because they were a 3 party network they had to go build partnerships for growth. They are actually one of the few payments organizations listening to consumers, as opposed to other banks. PayPal can turn customer insight (and market opportunity) into product within months.. as opposed to 3 years at the big banks. My example: Visa/Monitise and their couponing application.. in flight for over 3 years.
PayPal’s strategic plan? My guess
- Expand footprint with existing merchants to use PayPal at POS (Verifone and Virtual Terminal)
- Strike relationships with key retailers to drive adoption (Chase PaymentTech is merchant acquirer of choice).
- Get consumers a physical card to go with their paypal account. I have a PayPal Mastercard Debit from chase in my pocket.
- Create incentives for use and marketing. This is an interesting topic which I will leave to later. But clearly PayPal has the opportunity to replace interchange with advertising revenue (.. to drive merchant traffic or SKU volume). Part of this will include developing a POS “standard” capable of integrating incentives (held by PayPal).