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A prominent theme at last month's National Retail Federation Conference in New York City was "convergence," the melding of retailers' offline and online strategies across every conceivable device and channel. Both merchants and technology vendors are grappling with how stores can leverage tools like location-based service on smartphones and tablets, or apps like RedLaser that let users find lower prices online.
The goal of retailers is obviously to get customers to buy in-store or on their websites instead of simply buying from online-only outlets like Amazon. But online payment provider PayPal has another message for brick-and-mortar retailers: you can't uninvent a technology.
The company has been aggressively working since last year on an offline strategy that combines all the tools at its disposal to create solutions that help retailers compete in a converged world — and it's even showing them the way at its pop-up store in New York City.
According to Anuj Nayar, the director of global communications for PayPal, the offline strategy is part of something bigger than one company's attempt to gain market share. Nayar said the way people pay is seeing its biggest change since the introduction of the credit card, and PayPal is changing with it.
"PayPal is undergoing a fundamental shift in what we do," Nayar said in a recent interview with Mobile Payments Today at the company's New York showroom. PayPal opened the temporary location in Manhattan's Tribeca neighborhood last October to give retailers a glimpse of how it's integrating its core online payment product with mobile tools like Where, a location-based service eBay acquired last year, or its RedLaser product.
PayPal's offline products
PayPal's retail showcase makes it clear that PayPal doesn't see itself as providing a single solution. Its "mobile wallet" is really a collection of solutions aimed at making shopping easier for consumers whether they're at home, in a store or even just walking by a retail outlet they love. It's also a flexible set of tools that retailers can pick and choose from with payments as only a part of the offering.
Nayar said that's the point of the store, to show the range of solutions PayPal has that retailers can use to address the changing ways consumers are using to shop now.
"There are different friction points for each consumer," Nayyar said, "and no one technology is going to solve them all."
For instance, retailers looking to sell more goods online might be interested in the living room set up in the showroom that simulates what PayPal calls couch commerce -- customers shopping using tablets or phones to access a company's website. For merchants interested in loyalty promotions, a coffee shop scene demonstrates how the PayPal mobile wallet can store and access gift cards for a customer.
Along with the living room and coffee shop sets, PayPal has set up a hardware store, a grocery store and a small storefront representing a ladies shoe store. The scenarios come with large, interactive digital signage so visitors can actually see how the tools work, allowing PayPal's employees at the showroom to walk them through each use case.
What's consistent across every use case at the showroom is how the mobile wallet gives customers the ability to access their PayPal accounts to pay for goods, either by typing in the mobile number and PIN associated with an account, through a PayPal-issued plastic card, or even tapping an NFC-enabled phone at the point of sale.
Nayar addressed the lingering question about PayPal's perceived indifference to NFC as a technology to make payments at the point of sale. EBay CEO John Donahoe remarked last year that NFC stood for "not for commerce." Nayar clarified Donahoe's remarks and said he wasn't saying PayPal is against using NFC technology.
"He (Donahoe) didn't say he thought it was not for commerce," Nayar said. "What he said was that he had heard merchants call NFC 'not for commerce.'"
PayPal's mobile wallet difference
Nayar said the type of technology used at the point of sale isn't really what is important about PayPal's mobile wallet.
"We have two differentiators for our product," Nayar said. "First, is where your wallet lives. We believe it should live in the cloud."
Nayar explained that besides making payment credentials available to consumers anywhere on any technology, storing a digital wallet in the cloud solves compatibility problems down the line as well. With credentials available in the cloud, it doesn’t matter what kind of technology evolves to connect the wallet with the point of sale, or whether that point of sale is online or off.
"In the cloud," Nayar said, "you're totally future-proof."
The second differentiator is that a digital wallet should do the work of figuring out what payment methods are available for consumers. That means automatically managing payment methods that are applicable to a purchase, including discounts, coupons or gift cards. The mobile wallets should store the credentials, know which payment methods are applicable, and make them available when they're relevant, Nayar said.
"The wallet should be intelligent," he said. "Consumers shouldn't have to think about it."
To demonstrate the mobile wallet's intelligence, each shopping scenario at the store showed customers being presented with payment options based on the store or item being purchased. Payment options could include loyalty cards, discounts, gift cards or even the BillMeLater service, another PayPal acquisition from last year.
BillMeLater is a credit product that lets customers split a large purchase into monthly payments. The credit option is only offered to certain PayPal customers depending upon certain criteria.
Nayar wouldn't say how a customer's eligibility to use BillMeLater is determined, only that data available on consumers drives the decision. It's that data, which customers will have the ability to control, that will play an important role in the success of the mobile wallet with both merchants and consumers, Nayar said.
PayPal's next steps
At this point, PayPal is already working on pilot programs with several national retailers. The company started with a small test program with Home Depot but will roll it out to Home Depot stores nationwide by March. Reuters has reported PayPal is working on another pilot with Office Depot.
Nayar wouldn't say what other retailers are looking to use the PayPal solution, but he did say the company is looking to be available in a number of national retailers by the end of the year.
Nayar also said the pop-up store has been very successful, generating interest from day one. More than 100 retailers have visited the location since its opening, he said.
The company plans to keep the New York location open through March with a permanent showroom scheduled to open near PayPal's headquarters in San Jose, Calif., later this year.
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