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The company is set to roll out new in-store payment efforts as soon as 2020, CEO Dan Schulman said in an interview with Axios. This initiative could see it introduce a digital wallet for physical stores and utilize NFC and QR code technology to enable in-store payments, and follows it removing the ability to make in-store payments via its mobile app in March 2018.
Schulman’s increased interest in in-store payments stems from mobile payments’ potential to offer additional value and capabilities. The CEO noted that if PayPal’s in-store value was just a “form factor difference” — meaning the difference in paying with a phone rather than a credit card — its physical payments solutions wouldn’t take off.
But he’s now seeing that mobile payments can enable new capabilities, like choosing to use rewards points at the point-of-sale (POS), splitting a purchase between payment methods like rewards, a debit card, and a credit card, and mobile order-ahead.
These features could make in-store payments more convenient and flexible, helping PayPal become a significant player in the space, so it’s very possible PayPal’s in-store offerings will include such capabilities as well as other financial tools like POS financing. Notably, mobile in-store payments haven’t taken off yet in the US, as they’re projected to bring in just $76 billion in payment volume in 2019 in the country, while mobile e-commerce is set to more than double that total, but new features and values like those Schulman mentioned could help the industry take off in future years.
PayPal’s in-store efforts will come from both PayPal and Venmo and could help address the limitations of their businesses. PayPal could better reach the bulk of retail sales and strengthen its ecosystem to drive more usage. E-commerce accounted for just 10.1% of US retail sales in Q2 2019, per estimates from the US Census Bureau, so even though online retail is growing increasingly popular — it made up an estimated 9.2% of US sales in Q2 2018 — the vast majority of retail sales still occur offline.
Without a significant in-store presence, PayPal can’t reach those sales, so launching new payments capabilities for brick-and-mortar retail could enable the company to boost its volume. And if consumers grow accustomed to using PayPal’s digital wallet and its other services in-store, they may be more likely to form habits across payment types. Adding value to attract consumers is particularly important for PayPal at the moment because the major card networks have introduced a joint buy button that could convince consumers to use it rather than PayPal’s core offering.
In-store efforts could help Venmo address its profitability issues by adding new revenue opportunities and promoting others. If Venmo launches its own digital wallet or other in-store payment offerings, it could bring in new fees for its services, building up its revenue.
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It could also enable it to promote its new rewards program for its debit card and its forthcoming credit card, potentially increasing their usage and its overall performance. And Venmo could prove popular in an in-store context if it enables consumers to split their payments at the POS, as that leans on its established peer-to-peer (P2P) payments functionality, potentially giving it more opportunities to connect consumers with its other offerings.
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