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PayPal’s Point of Sale Vision: Empty Hands and Full Wallets

We expected at least some controversy at our first-ever “Dining with the Payments Stars” event. We even brought in a ringer: Damien Balsan, current head of PayPal’s ecosystem development and a former executive with Nokia — a self-described NFC “evangelist.”

But the first course hadn’t even been served before all the experts at our discussion agreed. One guest provided a particularly tight assessment of near-field communication’s (NFC) role in the industry: “It’s not payments.”

That’s not to say there isn’t room for NFC at the metaphorical table of new mobile technology. The chips could help consumers sync their various mobile devices; they could be used in security to permit building access; they could be used in the classroom to take attendance.

It’s for those reasons that PayPal is continuing to invest in the new frontier. “PayPal is not ditching NFC,” Balsan emphasized, noting that PayPal is continuing to invest in research and development efforts specific to NFC.

Balsan estimated that 30% of mobile phones might be NFC-enabled by 2015. But his comments — which garnered concurrent nods from all those in attendance — suggest that, once NFC deployment does reach critical mass, it might not (read: probably won’t) have the same impact on the payments industry we expect today.

As it turns out, our dinner event went much further than a discussion about NFC. Karen Webster had the advantage of sitting at the middle of our rather rectangular-shaped “roundtable.” Her take on the evening’s proceedings follows:


The Catalyst restaurant in Kendall Square in Boston (well, Cambridge to be precise) was the most perfect setting for the PYMTNS.com inaugural “Dinner with the Payments Stars” supper club series. This little gig is an attempt to gather a small group of no more than 20 (we had 18) around one big ol’ table with great food and good wine and even better conversation about the stuff that inquiring payments minds want to know. This one did not disappoint!

Damien Balsan, who recently joined PayPal as the major domo for its Point of Sale ecosystem development played the role of Sirius (e.g. the brightest payments star). The conversation catalyst was PayPal and its POS gig with Home Depot as well as its “loves me, loves me not” debate over NFC. Now, one of the rules of these little supper clubs is that we don’t eat, talk and tell, but I will share a few of the top line highlights without attribution (well, with one exception).

Damien (that is the one exception) gave all of us a really great overview of the PayPal point of sale experience which has a couple of ways that people can actually check out with PayPal (ubiquitous mag stripe card and finger to type in phone number + PIN at pretty much all but small merchants). There was a pretty consistent pooh-pooh around the table over the mag stripe card (so yesterday) and a pretty active banter around the phone + PIN option, otherwise known as the empty hands option. The driver for both of these solutions was the merchant’s desire to use the equipment they have – hence the mag stripe card and a client-facing terminal which enables the empty hands option.

There were questions galore over the security of the empty hands option (is it really secure since phone numbers are widely known) and are empty hands really all that attractive (won’t it take longer to checkout and doesn’t that slow down things in lane?). On the former, PayPal’s position is yes since customers get a text once a transaction happens. They will then know if an account is compromised and the transaction can be cancelled/voided. And, hey, PayPal has been the leader in handling risk and fraud. On the latter, PayPal’s position is also yes, and yes – it will take slightly longer, but not appreciably noticeable to people and they really like it.

What we all learned was a cool consumer-facing feature made possible because PayPal is acquirer, processor, and network. After a purchase at POS, customers can actually go in up to 7 days later and change how that transaction is to be charged. So, let’s say you went to Nordstrom’s and bought a new spring suit and put it on your debit card. Two days later, your car gets towed and to get it out of the car jail, you need to produce $200 in cash. You can go in and move the Nordies splurge to credit, and feel a little less pinched. Or, Bill Me Later might produce an offer to put the suit on a 90-day installment plan. The business model is a secret and the secondary market/arbitrage opportunities that this could create could be quite interesting. The trick though is making it easy for the user to take an action. Hybrid cards have been around for a while and haven’t gotten much traction since it seems too complicated for consumers to have to go in and change stuff after the fact. Now, if made easier via an email push that both prompted the option and provided the relevant information needed to make a quick decision and an easy button to click and make the adjustment, well, then that might do the trick. I am not suggesting that is what PayPal is doing – they did not share any details – this is all my speculation about what might actually allow this to gain traction.

The NFC topic was, well, almost boring. The collective net net of NFC is (a) ten years ago, it was all that anyone envisioned mobile to be so that is what everyone did, (b) as a result, it got mobile payments moving forward – a good thing – and lots of other ideas percolating, (c) it is likely to happen down the road and (d) the longer the road gets, the less likely it is to be a powerful mobile payments solution. No one is ready to publicly put a fork in it yet, since chips will get put into phones and the more phones with chips, the more opportunity there is for something to take hold on the payments front, but its position as THE mobile payments solution has been usurped by solutions that live in the cloud. Bottom line is no one is interested in the “NFC debate” anymore. Maybe it will become widespread, maybe it won’t, and meanwhile everyone is just focusing on technology they can put in the market today. This is really big news and you heard it here first.

The other interesting topic was data … and in particular, whether a player like PayPal could get a player like Home Depot or other Tier 1’s to share data with them. It was acknowledged to be the big and thorny question. The short answer is that some will, and some won’t and the decision point will be a proof of concept around how the sharing of that data will benefit the merchants more than they benefit today and/or without sharing. Business models—maybe Google’s—that are relying on getting data are more problematic. More was discussed, but that is part of the off the record part of our dinner. Next time, you’ll just have to come.

The event was the first of many to be sponsored by getta!Table, a new venture for Market Platform Dynamics that represents the first social commerce offer engine for the restaurant industry. More information on getta!Table is available online.

It was a really great dinner and while we didn’t exactly close the restaurant down, we were darn close to it. We’ll be doing this again, on a very regular basis with new topics and new anchor “stars.” To find out when we’ll be in a city near you or to suggest a city or a topic or a star – or all of the above, just pop me an email.

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