The CEO of eBay Inc. has thrown some cold water on the industry’s heated discussion of Near Field Communication, suggesting instead that large merchants will resist the unproven technology.
“While I think there will be experimentation with NFC, I don't think you’re going to see widespread adoption of NFC in the large merchants for quite a while--until there are standards,” John Donahue told analysts July 20 during eBay’s second quarter earnings conference call.
One large merchant Donahue said he spoke with deemed NFC to mean “Not For Commerce.”
“When you’re a large merchant and you have 500 stores and 14 checkout lanes per store, you want zero friction at checkout and the point of sale,” he said. “And they’re not going to allow anything that has friction–no proprietary systems.”
Nick Holland, a senior analyst with the research firm Yankee Group in Boston, agrees friction exists because “the installed base of contactless readers isn’t there yet,” and consumers are unfamiliar with the technology.
But Donahue is missing the point about NFC in retailing, Holland believes. “Intrinsically, it’s not going to be about the payment,” he tells ISO&Agent Weekly. “It’s about completely augmenting and radically changing the entire retail experience.”
Indeed, instant discounts via coupons or loyalty points rank high on the list of must-have terminal software as it relates to NFC, observers say.
As for industry standards, an international one for contactless payments already exists. It is called ISO/IEC 14443, Holland notes.
And Donahue failed to mention the NFC efforts of eBay’s PayPal Inc. payments unit. In June, PayPal demonstrated at a conference an NFC Android application consumers may use to transfer funds between PayPal accounts by tapping together two Nexus S phones.
Donahue did say that PayPal is better poised to find itself at the point of sale than NFC-based services because its system is proven. “With PayPal, we’ve had merchants reach out to us quite aggressively and say they want us to bring PayPal into the point of sale,” he said. “We see it as an incremental opportunity and a fairly significant incremental opportunity that will play out over the next three to five years.”
PayPal will be in trial with a major U.S. retailer later this year, Donahue said, noting some 20 merchants will participate in tests next year.
As for PayPal’s financials, the division reported its first quarter of $1 billion in net revenue, reporting $1.07 billion for the three months ended June 30, up 31% from $817 million during the same period in 2010.
EBay did not report PayPal’s net income, and it did not break out its Bill Me Later unit’s financials.
As of June 30, PayPal’s active account total reached 100.3 million, up 15% from 87.2 million a year earlier. The unit’s net total payments volume rose 34.7%, to $28.7 billion from $21.3 billion.
PayPal’s merchant services net payment volume was $18.8 billion, up 41.4% from $13.3 billion. The unit includes PayPal-accepting merchants, active PayPal accounts and eBay’s share of Mobile Express Checkout, an initiative that enables consumers to pay for purchases using their mobile phones. Mobile Express Checkout offers consumers the same payment option as the online version of PayPal.
As a company, eBay reported second quarter net revenue of $2.7 billion, up 22.7% from $2.2 billion a year earlier. Net income was $283 million, down 31.3% from $412 million.
EBay attributed the profit reduction to the GSI Commerce Inc. acquisition, which is expected to close in the third quarter. GSI provides electronic commerce and interactive marketing services.
