GameStop.com targets expanded customer base with PayPal

Overcoming its doubts about accepting payments through third-party payment services provider PayPal, video game retailer GameStop.com Inc. will begin using the payment service now that it’s available through processor CyberSource Corp. GameStop figures PayPal will increase its reach among young buyers without credit cards. "We get a lot of young people without credit cards, so this gives us another avenue to reach them," says Matt Hodges, a former accounting manager who now handles investor relations. "We feel this will expand our customer base." PayPal reports having 31 million users worldwide.

This will be the second time GameStop has entertained the option of using PayPal, a unit of eBay Inc that has become a popular payment method on eBay.com. GameStop balked at using PayPal the first time, because it was concerned about the difficulty it might encounter in assuring that payments were processed correctly, Hodges says.

But when PayPal agreed last month to let merchants access its payment service through CyberSource Corp.’s payment processing services, GameStop signed up. As a customer of CyberSource’s payment processing and fraud-prevention services since it launched in 1999, Gamestop felt assured that that it could handle PayPal payments, Hodges says. "It will make it easier from a payment processing perspective, because CyberSource brings the knowledge and expertise in payments reporting and transaction batching – details that we need to run our business and make sure the transactions are processing the way they should be," he says, adding that GameStop can now avoid coding a separate network link to PayPal.

PayPal arranges for consumers to fund a PayPal-hosted account ahead of time, using checks, money orders or credit cards, then draw on that account to pay retailers. PayPal, whose services are free to consumers, charges merchants a fee of $0.30 on each transaction plus a commission ranging from 2.2% to 2.9% on the value of each transaction.

CyberSource figures PayPal will be most popular among small merchants, which represent about 10% of its client base of 3,000 merchants, a CyberSource spokesman says. But it expects its market to expand among all sizes of merchants because of the large number of PayPal users, he adds.