PayPal strikes deals with 15 retailers; How customers gain
PayPal has made deals with 15 retailers including Toys R Us, J C Penney and Barnes & Noble that will allow consumers to pay for purchases with their cellphones while expanding the online payment company's service into additional physical stores.
Earlier this year Home Depot began accepting PayPal in about 2,000 stores.
For retailers, the service may attract more shoppers, provide more information about consumers, and help reduce costs associated with credit card payments.
For PayPal, owned by eBay Inc, physical stores can provide growth beyond its online roots.
EBay Chief Executive John Donahoe and Chief Financial Officer Bob Swan told Wall Street earlier this year that PayPal planned to sign up about 20 big retailers in 2012.
"They said 20 large merchants would partner with us this year. This is only our first installment. There will be others," Don Kingsborough, the PayPal executive overseeing the offline initiative, said from its headquarters in San Jose, California.
PayPal grew quickly by making it easy for people to make secure online payments. It grew to prominence on eBay's online marketplace, leading eBay to acquire the business in 2002. It has since branched out to hundreds of other e-commerce websites and is working on expanding to mobile transactions as well as physical stores.
Other retailers announced on Thursday that have signed on for PayPal's in-store service are Office Depot, American Eagle Outfitters, Abercrombie & Fitch, Rooms To Go, Jos. A. Bank, Aeropostale, Foot Locker, Nine West, Jamba Juice, Guitar Center, TigerDirect and Advance Auto Parts.
Jamba, American Eagle and Toys R Us were notable additions because they also use Google Wallet, a PayPal rival run by Google Inc.
Some of these retailers will go live with PayPal in-store payments next month, Kingsborough said, while not mentioning specific merchants.
EBay shares closed down 3 cents at $39.67 on Thursday.
Shawn Milne, an analyst at Janney Capital Markets, said PayPal had yet to strike a deal with a huge retailer, or "whale," such as Target Corp.
He said, however, that the breadth of retail categories represented by the merchants announced on Thursday would likely help PayPal encourage more consumers to use its service in physical stores.
David Marcus, PayPal's new president, said it takes time to bring large merchants into such a new initiative.
"We're not even at halfway through the year, and we already have 16 large retailers," he said, adding that PayPal expects to comfortably reach its goal of 20 big merchants in 2012.
Marcus said PayPal may process more than $7 billion worth of mobile payments this year.
He also said that more than 300,000 small businesses had registered for PayPal Here, the company's card payment service that works with smart phones and competes with start-up Square Inc. PayPal Here was launched in March.
Earlier on Thursday, PayPal said it had signed agreements with VeriFone Systems and Equinox Payments to get its payment technology on their networks of checkout terminals.
VeriFone and Equinox provide payment terminals that are used in stores run by many of the world's largest retailers. Earlier this year, PayPal signed a similar deal with the other leading payment terminal provider, Ingenico.
These agreements should help PayPal's offline expansion, giving it potential access to almost 40 million payment terminals that are already installed in stores worldwide.
PayPal's service was quickly rolled out in Home Depot stores this year, partly because no new hardware needed to be bought or installed by the retailer. Instead, just software on payment terminals needed to be upgraded.
"An important part of our future is to get to ubiquity," Kingsborough said on Thursday. "There will be 40 million terminals eventually to let consumers buy in stores with PayPal. That's one of the big building blocks we have to get to ubiquity."
VeriFone is used by 80 percent of the top 200 U.S. retailers while Equinox is used by three of the top 10, according to Doug Anmuth, an analyst at J.P. Morgan.
"This ubiquity makes it significantly easier for PayPal to quickly increase adoption among large retailers," Anmuth said in a note to investors. "The ability to quickly upgrade software on point-of-sale terminals removes a great deal of friction around the willingness of offline merchants to adopt PayPal."