Paypal payments come to Home Depot store shoppers. See last Friday’s PayPal blog about their trial of point-of-sale (POS) payments at 5 unnamed Home Depot stores https://www.paypal-media.com/aboutus.cfm. Home Depot customers can now check out at those five stores by entering their phone numbers and PayPal PIN numbers, or by swiping their PayPal cards, at the point of sale.
I’m excited that PayPal is finally making a meaningful entrance into physical POS payments. The card brands have overly dominated this space for far too long. There certainly has been no shortage of challenges to Visa and MasterCard’s empires such as:
a) the watered-down (by the financial lobby) Durbin amendment to Dodd Frank Wall Street financial reform act that lowered debit interchange fees banks can charge merchants, but not by nearly as much as merchants originally hoped for.
b) countless class action lawsuits against the card brands, led by retailers such as Wal-Mart, who claimed unfair trade practices and merchants fees that were unjustifiably high. In 2003, Wal-Mart did manage to win back $3 billion from Visa and MasterCard for itself and its class, but increased merchant fees were levied by the card networks where and when they could, and quickly ate up the merchant settlement gains.
c) legal challenges to Visa’s and MasterCard’s seemingly unfair dominance and apparent ‘monopoly’ status that never went anywhere with the U.S. Dept of Justice Antitrust division.
The real challenge to the card brands will come from viable alternative payment networks. PayPal has the best chance at this point, even though it’s somewhat of an indirect challenge since it relies both on the payment card and bank-to-bank transfer networks for its livelihood.
With well over 100 million account holders (some estimates are much higher), PayPal has importantly won trust among consumers. A recent Gartner survey of over 3000 U.S. consumers found that PayPal is perceived to be safer than the card brands, Visa and MasterCard, although by a relatively narrow margin. PayPal’s trust lead over other large alternative ‘wallet’ providers such as Apple, Google and FaceBook is much larger. In the case of FaceBook in particular, PayPal commands a substantial lead when it comes to consumer perceptions of safety and security.
This Home Depot trial, along with other mobile payment trials announced by Google, MasterCard, Citibank and some telco carriers marks the beginning of intense competition that will benefit consumers in terms of more personalized choices and eventually lower prices. After all, consumer ‘wallet share’ is increasingly coveted by the big card brands, banks, telcos, retailers and anyone else asking for your money. The race to grab a piece gets much more interesting and innovative as mobile payments – PayPal or otherwise – and platforms roll out.
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