E-commerce grew 20% for Costco in fiscal 2015—20 times faster than store sales.
It should come as no surprise that as e-retailers look for ways to sell products and services over cell phones and other mobile devices, online payment systems would follow. The most recent payment provider to tap into mobile commerce is PayPal, the payment subsidiary of online auction giant eBay Inc.
PayPal on April 6 launched PayPal Mobile, a text-message-based service allowing consumers in the U.S. and Canada to make purchases via mobile phones using their PayPal accounts. PayPal account holders who sign up for PayPal Mobile also can use the service to transfer money and to contribute to charities.
PayPal Mobile is being positioned as a new direct-to-consumer channel for merchants, giving them access to 100 million PayPal account holders, says Kevin Dulsky, director of strategic global business strategies.
Tracking offline ads
The Text-to-Buy feature of the service allows consumers to purchase items featured in advertisements by sending a product code from the ad to PayPal via text messaging. The consumer enters the code, a one-word description, and hits Send. PayPal then uses automated voice response to contact the customer, asking for a personal identification number to confirm the process.
PayPal notifies the merchant of the payment and the item is delivered to the shipping address on the customer’s PayPal account. “We’re giving consumer brands the ability to add into their advertisement a very simple call to action,” Dulsky says.
PayPal Mobile also can be used to track response to advertising, giving retailers insight into how well an ad campaign is doing. For example, a retailer might compare the results of ads in magazines, newspapers, posters on buses and subways and on TV or radio, Dulsky says.
“They can change the product ID slightly so they can track and measure every single one of those ad placements,” he says. “They can actually see which one generates the most sales. It’s a great way to track traditional ad spending.”
PayPal Mobile is a “terrific move” for PayPal because it extends its natural core competency of facilitating payments in the e-commerce realm to the terrestrial realm, says Dan Schatt, senior analyst at payment researchers Celent LLC. He notes that a little more than 30% of PayPal’s business takes place off eBay.
“This opens opportunities for Pay Pal to be looked at as more of an independent payment platform from eBay in that you’ve got a lot of merchants in the brick-and-mortar world that could effectively use PayPal to open up a new channel and bring in additional revenue,” he says.
More robust auctions
For eBay, it’s an opportunity to allow existing eBay merchants to promote their stores and auction sales to individuals who otherwise might not be able to participate because of location issues, Schatt says. “If PayPal Mobile is integrated more deeply into eBay’s auction platform, they’ll have a lot more robust auctioning that takes place,” he says.
To participate in Text-to-Buy, retailers need to set up a PayPal Mobile account either online or through their PayPal account representative. The PayPal Mobile account is separate from a regular merchant account. Fees for mobile transactions are higher than for regular PayPal transactions, Dulsky says, but declines to give details.
Among merchants initially participating in the Text-to-Buy feature of the program are 20th Century Fox Home Entertainment, Bravo, MTV, and the NBA Store. Several of the participating retailers don’t accept PayPal online, but Dulsky thinks that will change. “We certainly think we’re going to acquire new merchants but we also think we’re going to extend our relationship with current merchants as well,” he says.
For consumers to use the mobile service, they must have a PayPal account and register a mobile phone number and PIN at paypal.com/mobile. Currently, four wireless carriers are set up for the PayPal mobile service: Alltel, Sprint, T-Mobile and Verizon. PayPal expects to add more carriers.
PayPal also plans to roll out PayPal Mobile in the United Kingdom this year. PayPal has account holders in 55 markets worldwide.