PayPal Makes the Jump Into Brick-and-Mortar Retail Stores
February 13, 2012 3:24 PM
Don Kingsborough of PayPal
While PayPal is king of e-commerce payments, this area only accounts for less than 10 percent of U.S. retail sales, and PayPal wants more
is working vigorously to break into the brick-and-mortar retail store realm by offering more data transparency and competitive prices.
Don Kingsborough, Vice President and General Manager of Retail and Prepaid at PayPal, is at the helm of the latest effort. While PayPal is king of e-commerce payments, this area only accounts for less than 10 percent of U.S. retail sales. That's why Kingsborough is aggressively moving PayPal to physical stores and hopes to push it up in the ranks with the likes of Visa and MasterCard.
The plan is to reach a public goal of 20 major retailers using the point-of-sale (POS) system by the end of 2012. The system works when a customer checks out, and the POS card-swiping terminal offers a new orange button saying, "Pay with PayPal." Customers can select this option, confirm the total, then type in their cell phone number and a PIN number that was determined before going into the store.
"We are going to do it with the greatest brands in the world -- Home Depot and every other top 100 retailer," said Kingsborough. "There isn't a major brand we haven't talked to."
PayPal, which is owned by eBay Inc., already has Home Depot testing the POS system and Office Depot is next on the list. PayPal refused to disclose the names of any other retailers onboard.
There's no doubt Kingsborough likely has more retailers in his back pocket, though. In less than a year's time, Kingsborough traveled 94,000 miles total on United Airlines in order to meet with major retailers. Many of the contacts came from Kingsborough's Blackhawk Network, which he founded in 2001. Blackhawk Network is the largest provider of prepaid gift cards for companies like Home Depot and Starbucks.
Kingsborough seems to be the right guy for the job since he has already worked to get large retailers on board with Blackhawk Network.
PayPal plans to compete by subsidizing the new service, which means merchants could pay less with PayPal than they currently do with other credit and debit payment processors. PayPal stands to win because 45 percent of PayPal transactions are funded through user's bank accounts or an existing PayPal balance.
In addition to aggressive pricing, PayPal will also
share more data
with retailers, such as purchases and shopping activity. This extra information will allow retailers to read their customers better and provide appropriate offers to them, which encourages more shopping.
It won't be entirely easy for PayPal to branch out of e-commerce, though. At this point, PayPal isn't relevant off of the Internet, and it will have to work to entice customers to use the service instead of just sliding their credit or debit cards.
"We are going to continue to work with them to make sure they understand the reality of the Internet. A lot of these people don't have Ph.Ds, and they don't have a degree in computer science." -- RIM co-CEO Michael Lazaridis
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