It slices, it dices. It accepts checks, electronic payments and plastic cards (by both camera and by swipe). PayPal Inc.'s new mobile technology may seem like overkill, but the company says every payment counts when trying to convince consumers and small merchants to use handheld devices.
Mobile payments are a hard sell, even for the dominant online alternative payment provider. Studies often find that consumers have reservations about using phones for payment, either due to security concerns or just a lack of comfort.
PayPal has nevertheless been pushing aggressively at the point of sale by testing a system with large merchants. Its new mobile payment app, announced Thursday, brings small merchants into the fold by helping them accept any payment method through a PayPal account.
The everything-but-the-kitchen-sink approach is "just a reflection of the world that we see changing around us," says Sam Shrauger, PayPal's vice president of global product and experience. "Everyone sees the offline and online worlds coming together."
If PayPal gets significant momentum with its revamped mobile strategy, it could displace banks and other rivals in the mobile wallet space.
"For banks or any other payment issuer, it's vital that they not merely find themselves inside a wallet that they have no control over," says James Van Dyke, the president and founder of Javelin Strategy and Research.
The new PayPal Here system allows payments to be made electronically as well as by card swipe and by using the phone's camera to accept card or check payments.
Some of these payment methods, such as digital transfers and mobile check capture, were already supported in PayPal's person-to-person payment app. The feature that lets it accept card payments by camera is borrowed from Card.io and the triangle-shaped magstripe reader draws clear inspiration from Square Inc.
So a lot of what's new is the packaging.
But the packaging is key — PayPal's mobile app has long been pitched at consumers, with consumer-centric functions such as a widget that helps split dinner checks and calculate restaurant tips.
Its new system, Here, is all business.
PayPal is offering Here as a separate app from its consumer payment app, and the consumer app has been updated to remove (for now) distractions like the tip calculator. Instead, the updated app has a feature that lets users locate Here merchants.
The Here reader carries with it a different fee structure than what PayPal, a unit of eBay Inc., charges for online transactions.
Merchants that use PayPal Here pay a 2.7% transaction fee for debit and credit cards, says Shrauger. There is no fee for accepting checks.
To make the pricing more palatable, PayPal is giving merchants a MasterCard-branded debit card that pays 1% cash back on certain purchases.
PayPal credits its early success in online payments to having stayed ahead of fraud trends. Its push into mobile and in-store payments challenges it to keep up with a new set of fraud trends.
"What's critical here is managing the risk and the risk detection in the payment system," says Shrauger. "It's something that we have done a lot of thinking about and built a lot of technology around."
The company no doubt "integrate[s] end-to-end encryption as well as their other fraud methodologies, which should make this a more secure payment platform than Square," says Wedbush analyst Gil B. Luria, in an email.
At the beginning of this month, PayPal expanded a point of sale payment trial with Home Depot Inc. to include all of the hardware store's 2,000 locations. PayPal is testing this system with about 20 merchants altogether, though it has not announced any other nationwide rollouts.
Though PayPal seems to have nearly every payment option (short of cash) covered with its new app, there are areas for it to expand.
"It's version 1.0," says Gwenn Bezard, co-founder and research director at Aite Group LLC. "It could have been nice to come up with an EMV [chip-card] capable solution … but that may come later down the road."