Why PayPal is preparing for the next Google Glass

PayPal is dusting off the idea of conducting commerce augmented reality glasses, a concept that fell flat five years ago. But a half decade is an epoch in technology time, enough to reevaluate the competitive necessity of AR payments.

For one thing, PayPal's innovation is more about augmented reality than it is about high-tech sci-fi glasses, which are just one possible delivery venue and not even the top of PayPal's "refresh" of a two-year-old patent application. The patent application deals more with how data is transmitted from a target object and made visually available as an overlay than it is in embedding that technology into a specific device.

Angel Garcia/Bloomberg

AR has become a fixture of Apple and Google smartphone announcements, and the companies are ramping up efforts to pair augmented reality, shopping and payments to acquire merchants through Google's ARCore and Apple's ARKit. Apple scored an early win by bringing Amazon to its ARtoolkit to enable shoppers to "picture" how items would fit into their homes before making a purchase.

And even though Google Glass failed to reach the consumer market, many manufacturers use the AR headset in their factories to aid with various tasks.

For merchants, the ability to offer a layered visual and content display for an object in a store or website is gold, since it can pair marketing, offers, product information, price and checkout in the same line of vision. And for PayPal, it's not so much about latching onto some future high-tech trend as it is responding to very high-profile competitors in merchant acquiring that are making inroads into augmented reality and showing some progress.

Augmented reality trials at fashion brands such as Sephora and Max Factor have shown promise by allowing people to mimic "trying on" items at home before going to a store. AR has also come to shoppers at IKEA, which allows consumers to use AR to "picture" furniture in their home, or virtually construct furniture before doing so physically. And Mastercard has collaborated with Marie Claire on "smart mirrors" to give consumers a view of how potential items will look before making a purchase.

"PayPal is not the only company exploring how augmented reality could enhance the customers’ shopping experience, and glasses are just one way to deliver that experience," said Zil Bareisis, a senior analyst at Celent.

PayPal, which did not respond to a request for comment, could also diversify its customer experience at a time when other large companies are experimenting with IoT and augmented reality. PayPal has long sought to extend its reach into brick-and-mortar retail and enhance the customer experience for online shopping.

It's Venmo P2P app is a large part of that effort, and adding smart glasses or other wearable technology to social payments could enable consumers to shop online together, or add a social and visual element to in-store shopping.

Consumers are also more comfortable with IoT and wearable technology than they were five years ago. IoT devices are quickly expanding, as is planned enterprise investment in the technology. This market was practically nonexistent when Google Glass was introduced, but is becoming part of many retailers' technology plans. Merchants are also looking for ways to respond to Amazon's technology plays, making a deeper dive in to AR, smart glasses and IoT more likely than in the past.

And connected glasses are making a comeback, despite Google Glass' appearance on a Time list of technology flops that included such items as Palm Pilots and Betamaster. Apple is developing a version of AR glasses off of its ARKit, though CEO Tim Cook has also tried to cool expectations for AR headsets. There is also a range of manufacturers planning to introduce augmented reality glasses in the coming year.

Google Glass failed because of its high price tag—the "explorer edition" sold to early adopters cost about $1,500—and other factors such as aesthetics and lack of a clear reason to pair web connectivity with glasses.

"If and when we see the resurgence of smart glasses, it is likely to be for specific use cases, such as augmented reality while shopping," Bareisis said. "In contrast, Google Glass was launched as a general product to provide digital overlay to customers’ everyday lives, which for most people turned out to be too much too soon."