PayPal, the online payment service owned by eBay, is planning to introduce a method by which people can use PayPal to pay for goods bought in brick-and-mortar stores like Starbucks Coffee. The move is widely seen as a defensive tactic against possible competitors.
Last month, PayPal announced the launch of a service by which Android phone users could transfer money via near-field communication (NFC), or "bumping". The users would sign in, tap their phones together, then be able to transfer money back and forth.
John Donahoe of eBay hinted that bumping would not be the method by which point-of-sale PayPal transactions would be conducted, blaming a lack of standards and saying, "[Merchants] aren’t going to allow anything that has friction." It is likely that the method will involve magnetic-stripe cards or printed bar codes. Starbucks has already implemented a pay-by-barcode method at their storefronts.
Donahoe mentioned that the advantages of PayPal's risk and fraud protection had driven merchants to request PayPal at the point of sale. PayPal expects to have 20 merchants on board by the end of the year.
That's not to say that eBay believes that PayPal at the point of sale is going to be very lucrative. Donahoe's forecast showed slow but steady growth going into the future, and presented it as just one part of a vision of integrated commerce: "In this new world, physical stores become just another point of access. Location alone is not enough. It’s not an advantage."
PayPal recently cleared away some of the competition by purchasing mobile phone based payment service Zong. The major competitor on the horizon may be Square, a payment service formed by Twitter founder Jack Dorsey that allows credit cards to be read on mobile phones. If that's the case, it doesn't seem that there's much to worry about; Square is still largely used by small businesses, and poses little threat to PayPal's empire.
