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PayPal Says Its Mobile Efforts Are Paying Off

More PayPal Inc. customers are using its payment service from their mobile phones.

EBay Inc.'s payments unit in 2010 nearly tripled its eBay Mobile gross merchandise volume to $2 billion from the previous year, driven by strong holiday shopping.

"Mobile is clearly becoming a new way for consumers to shop," John Donahoe, eBay's president and chief executive, told analysts Wednesday during a conference call to discuss fourth-quarter earnings. "Our mobile applications have now been downloaded more than 30 million times in eight languages across 190 countries."

PayPal last year launched Mobile Express Checkout, which enables consumers to pay from their PayPal accounts when shopping at large retailers such as Nike Inc. and Sears Holdings Corp. using their mobile phones. The service functions similar to the online version of PayPal.

Its newest mobile app, which the company unveiled in October, allows consumers to deposit checks into their PayPal accounts using images captured with the camera on an Apple Inc. iPhone.

Expanding its mobile operations even further, PayPal also is working to support mobile payments in stores, Donahoe said.

The payment service is one step closer to enabling consumers to pay at the point of sale using PayPal through a recent Bling Nation Ltd. partnership with VeriFone Systems Inc.

Additionally, Starbucks Corp. allows PayPal as a funding method for the Starbucks prepaid card, which can then be used to make payments from the Seattle coffee retailer's mobile app.

PayPal plans to offer brick-and-mortar merchants the ability to use mobile coupons so it is not just a payment method at the point of sale, but also a means to generate demand and increase customer loyalty, Donahoe said.

Todd Ablowitz, the president of the consulting firm Double Diamond Group LLC in Centennial, Colo., said that in general, the physical world is where PayPal sees its next growth opportunity by giving consumers the option to pay for purchases in person from their PayPal account using their mobile phones.

But while consumers may embrace mobile payments, PayPal may face opposition from merchants because of its fees, Ablowitz said.

For online purchases, PayPal charges merchants 2.9% to 3.5% of the sale, depending on the purchase amount. But PayPal's model is based on interchange for card-not-present transactions, Ablowitz said. For transactions in person, merchants likely would be charged a higher rate unnecessarily, he said.

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