Gauthier: Payments Is In “Battleground” Mode
by Alex Walsh
Opinions likely vary on whether the new payment experience being offered to the consumer by PayPal — its “empty hands” mode — is the way of the future. Perhaps the method will stick; perhaps it won’t.
But the fact that you can buy things from Home Depot with your mobile phone number and an eight-digit PIN does say something about the future of the consumer experience at a higher level. It’s the same message sent by the $100 million backing the mobile carrier joint venture; the same one sent by Wal-Mart and Target when they shunned every other major investment in the payment space in favor of their own system.
The payments industry is changing. In fact, Patrick Gauthier, PayPal’s head of product strategy will go further: the space has just entered a “battleground” time period, where over the next three years competitors will be “vying for position” in terms of long-term market share. The likely loser: manufacturers of plastic cards.
“The golden years of the card are behind it,” Gauthier says. Which isn’t to say the swipe will be gone tomorrow; indeed, old habits die hard (see: checking). But by all accounts the industry — particularly the consumer experience at the point of sale — is ready to be disrupted.
Of course, commerce changes all the time. But for a while now, Gauthier argues, those changes at the point of sale have been dictated by the networks, as the focus has shifted from credit card transactions, to debit card purchases, now to the usefulness of prepaid accounts. To win the war that’s starting just now, businesses need to deliver on the promises made by their PR departments every day: giving the consumer what they want, rather than telling them what that is.
When I asked Gauthier about PayPal’s strategy for convincing consumers to use its new “wallet in the cloud” over and over (if you’re not familiar with the technology, see paragraph 5 of Karen’s “Dinner with the Payment Stars” recap), it was consumer preference to which Gauthier pointed immediately. For example, a previous iteration of the “hybrid card” model that PayPal’s new wallet vaguely mirrors put two MagStripes on one piece of plastic. To payments geeks, that option sounds both innovative and marketable; consumers love choice, don’t they?
“But the consumer experience was not good,” Gauthier contends. (Indeed, research in behavioral economics shows that too many choices can often frustrate the consumer.) So rather than tell consumers which payment method is best for them, PayPal is working to accept all types of payments: plastic card, NFC, the new “empty hands” mode, even barcode scanning. In a way, PayPal is avoiding the frustrations of consumer choice by letting them decide how to pay — but then not tacking on any other additional brain work beyond a choice they would have had to make anyway.
If you talk to either Gauthier or Damien Balsan, head of PayPal’s ecosystem development, they’ll tell you that the same type of “choice avoidance” is key on the merchant side as well. To achieve their goal of linking up with 20 national merchants by the end of the year, they have to be flexible in terms of integrating with existing forms of payment acceptance. (Again, refer back to the point about multiple forms of payment, including swipe, tap, sign, poke, wave…)
When I asked Gauthier to summarize this larger trend of consolidating innovation adoption with existing consumer and merchant preferences, he quoted the man to whom he reports on PayPal’s business achievements. Apparently, there’s one phrase in particular that’s frequently used by eBay CEO John Donahoe to describe the current payments environment.
“This is no longer e-commerce,” Donahoe says. “This is commerce.”