October 20, 2011, 11:44 AM

PayPal looks to offline payments to fuel its growth

The payment company will begin tests this fall at one retailer.

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PayPal, the payment services unit of eBay Inc., is ready to offer consumers a shopping service that lets them use their mobile phones to find deals and make purchases at retail stores. The move is part of the company’s strategy to capture additional transaction revenue that takes place outside of PayPal’s traditional realm of e-commerce.

“It’s about what the consumer wants,” says Don Kingsborough, PayPal vice president of retail and prepaid cards. “The consumer wants to shop anytime, anyplace and anywhere.”

PayPal will test the shopping service at an undisclosed large retailer this fall. The scheme will draw upon recent eBay acquisitions, such as Where, a mobile app lets consumers check inventory at nearby stores.

Once the consumer is in the store and ready to make a purchase, PayPal would provide the consumer with a couple of payment options, Kingsborough says. One is to enter a phone number and personal identification number into the payment terminal and the other is to swipe a PayPal-branded magnetic stripe card through the terminal and enter a PIN. PayPal accountholders will have to apply for the PayPal card, which carries no identifying information. Either way a consumer pays, PayPal will process the transaction because both options are tied to PayPal accounts, Kingsborough says.

The allure for PayPal is the volume of store sales, which Kingsborough says greatly eclipses PayPal’s $100 billion in expected 2011 transaction volume. The National Retail Federation trade group says U.S. retailers had sales of $2.3 trillion in 2009, the most recent year for which that data are available.

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