PayPal In 2010 Tripled Its Mobile-Payments Volume, CEO Says

EBay Inc.’s PayPal Inc. unit in 2010 nearly tripled its eBay Mobile gross merchandise volume to $2 billion from the previous year, driven by strong holiday shopping, John Donahoe, eBay president and CEO, told analysts Jan. 19 during a conference call to discuss fourth-quarter earnings.

During the most recent holiday season, PayPal experienced a surge in consumers making purchases using its online-payment service with their smartphones and other mobile devices (see story).

“Mobile is clearly becoming a new way for consumers to shop,” Donahoe said. “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 application, which the company launched in October, enables consumers to deposit checks into their PayPal accounts using images captured with the camera on their Apple Inc. iPhones (see story).

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

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. (see story).

The company also recently updated its PayPal application to enable iPhone users to locate nearby merchants that accept Bling Nation payments (see story).

Additionally, Starbucks recently added PayPal as a funding method alongside conventional payment cards. Consumers may use the app to add funds to the Starbucks prepaid card tied to the app, which displays a bar code to scan at the point of sale at Starbucks locations (see story).

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 explained.

At least one observer likes the direction eBay is taking PayPal.

“PayPal is definitely headed towards Near Field Communication payments,” Todd Ablowitz, president of Double Diamond Group LLC in Centennial, Colo., tells PaymentsSource.

NFC supports two-way communication with other NFC chips, enabling users to initiate payment but also to download coupons, discounts and rewards for redemption at the point of sale.

In general, the physical world is where PayPal sees its next growth opportunity, Ablowitz says. PayPal wants to give consumers the option to pay for purchases in person from their PayPal account using their mobile phones, he says.

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

For online purchases, PayPal charges merchants 3.5% to 2.9% of the sale, depending on the purchase amount. But PayPal’s model is based on interchange for card-not-present transactions, Ablowitz explains. For in-person, mobile-based transactions, the fee scale becomes challenging because merchants likely would be charged a higher rate unnecessarily, he notes.

During the course of this year, however, many of the barriers across mobile payments will fall, Ablowitz contends. And some of the key players, such as carriers, card networks and smartphone manufacturers, may even end up working together, he surmises.

EBay’s payments unit, which also includes Bill Me Later, reported a 24% increase in fourth quarter net revenue (see story).

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