In the book The Paypal Wars – an insider’s perspective on the people and events that helped create the company and its acquisition by eBay in 2002 – there is a delightful insight into its ‘duff’ PR moment with James Doohan ‘Scotty’ from Star Trek. The plan was to have him “beam”$1m to randomly selected recipients using PayPal’s Palm Pilot application. “No one had realised that the star was now well into his eighties…..While he gregariously handed out autographed Scotty magnets to the staff, it dawned on us that we might have a problem. In 24 hours this man would be paraded in front of the inquisitive press at a media event weber he was supposed to use a Palm to beam $1m all around the globe and he had no idea what PayPal did.”(Ironically it did not matter, because the octogenarian failed to attract members from the Fourth Estate.)
After a 12 year run together, now that eBay has spun off Paypal this story illuminates the real impediment to the explosion of the mobile payments method. Its adoption – the lack of it. If an 80 year fails to see a single compelling reason to ditch cash and cards to adopt mobile payment it will be a major headache for not just for Paypal but everyone from Google to banks like Barclays and Bank of America to telecom companies EE and AT&T – all of whom have announced plans for digital wallets and mobile payments.
The question that these companies are perhaps failing to ask themselves is whether they are creating the right circumstances for a specific or urgent consumer need? We all understand the co-relation between an emotionally charged moment of truth and the change in consumer behaviour. Why then is the digital wallet technology driven by businesses looking to benefit from new consumer experiences that are yet unproven, rather than creating experiences that are working for the good of the customer?
This was one of the problems for PayPal. For instance, in the last decade its focus has been primarily the service of the auction business rather than serving the changing needs of its global consumer. How else can it explain the fact that it failed to respond to growth of international money market transfer, allowing rivals Moneygram and Western Union to emerge into giants of international remittances business? It was also late to venture into the business finance through its working capital loans. In the payments space it is a small part of the ecosystem. Surprised? PayPal services 152 million active registered accounts online and last year it reported about $200m worth of transactions. Impressive numbers but dwarfed by the Chinese competitor Alipay, which has 300 million users who conducted about half a trillion dollars’ worth of transaction last year.
Paypal’s other major problem, staring right at its face is it failed to make that transition to mobile. Now it faces a very real threat from nearly everyone that has jumped into this market, from tech giants to credit cards. Google Wallet and the new and shiny Apple Pay pose a humongous challenge. Apple already has McDonalds, Disnet, Macy’S and Subway on board, along with 258 retail stores alongside Groupon and Uber and also Mastercard, Visa and American Express. The first ad for Apple Pay this week came not from Apple but Mastercard. (PayPal reportedly nearly had a deal with Apple to power Apple Pay, but that was until the Cupertino crew found out that PayPal had struck a similar deal with Samsung to offer fingerprint-protected mobile payments to Galaxy S5.)
It is not Apple alone, but with Twitter and Facebook also adding to its commerce features the pace at which mobile payments is fast moving away from being just a novelty feature is quickening. The market is exploding with new technologies, new platforms, new networks. The growing popularity of Venmo, the eBay owned peer-to-peer payments app and its rivals PopMoney and Square Cash; Wal-Mart’s roll out of its own domestic money transfer service; the success of the Starbucks app, which is on track to process over $1.5 billion in payment volume in the U.S. in 2014 (Business Intelligence estimates) and the rise and rise of Bitcoin all point to the speed of innovation in the sector.
If enough people started to use these payment methods, who is to say that the likes of Apple or Google will not launch their own payment networks disinter-mediating both the credit card companies and even the banks in future? I would quite like to convince my mum to tap on her phone and pay for her grandsons’rugby classes. A cheque in the post takes too long. Now if only they could have got Scotty to ‘beam up’money via his ‘tricoder’ before he died, mobile payment could have been enjoying its credible moment.