You'd use PayPal to buy a second-hand leaf blower from a stranger on eBay
). But would you use it to buy a new leaf blower at the Home Depot
PayPal bets you would. And eBay's money transfer subsidiary has been quietly, quickly rolling out its hugely successful operation to a shopping mall near you to test that hypothesis.
On Wednesday, PayPal announced that its cloud-based payment system is up and running in 250,000 stores across the country, from big-name chains like Home Depot, American Eagle
) and Foot Locker
) to smaller family-run businesses.
Its rollout has been speedy. There were only 20,000 brick and mortar outlets using PayPal last year. Since then, the eBay-owned company has teamed up with Discover
), making it easy for merchants to accept PayPal through Discover's banking network.
The aim is for shoppers to be able to use PayPal at the cash register in two million stores by the end of 2013. In many of these transactions, all a customer will need to do to make a purchase is type in his or her cell phone number.
PayPal's quick push into real-world retail represents a challenge to fledgling digital payment systems like Google
) Wallet, which is now accepted in 700,000 stores through a partnership with Mastercard but has yet to make a name for itself with the everyday shopper. A February ComScore study of digital payments revealed that 72% of respondents were aware of PayPal, versus 41% for Google Wallet.
"I think if Google is serious about the payments business, they should be extraordinarily concerned about this PayPal move," said Philip Philliou, an industry consultant who runs the specialist blog Payments Deep Dive. "PayPal has a fairly dramatic lead. If this plays out, and consumers look to PayPal as their one-stop online and offline cloud-based mechanism, it could be a meaningful rival to the credit card companies."
Philliou thinks the idea of PayPal putting giants like Visa
) and MasterCard
) out of business at the checkout is "malarkey," but said that cards with smaller user bases like American Express
) should expect some rivalry. Thanks to its online ubiquity, PayPal counts more than 110 million users. By contrast, AmEx cardholders number somewhere north of 50 million as of 2012.
"If PayPal executes as planned, they will eventually dwarf American Express," said Philliou.
Brian Cohen, executive vice president of consumer consultancy Etailing Solutions, isn't so sure PayPal's ascendancy will be a death knell for smaller credit cards at the checkout. On the contrary, he thinks PayPal's brick and mortar business will soon have a more serious rival than even Google or AmEx: Apple
), the one tech giant not already in the digital payments space.
"Apple does have mobile wallet patents, but they've been doing it quietly," said Cohen. "They're going to be a player, and they're positioned to do well, with almost 40% of the smartphone market. They have the ability more than anybody to come out with a technology upgrade and be in the hands of millions in minutes. They had Siri to 4 million people in 48 hours," he said.
Meanwhile, says Philliou, PayPal's parent eBay may benefit more than expected from the digital payment giant's move in-store.
"If I purchased a leaf blower from Home Depot using PayPal, then got home and decided my garage was too full and wanted to sell it, I'd put it on eBay and use PayPal," he said. "It'll be top of wallet, top of mind. It's a virtual circle. I think if this plays out and PayPal is able to convince these online users to make transactions in the physical world, these behaviors are going to benefit eBay beyond what they ever anticipated."
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