Private equity firm Apollo Global Management will take Rackspace private in the all-cash deal.
But those smartphone payments face a number of hurdles.
Recent moves by two big players in web and mobile commerce may turn Bluetooth into the missing link that enables consumers to pay in stores with smartphones.
PayPal, the online payments system owned by eBay Inc., has announced a new in-store mobile payments technology, PayPal Beacon, that potentially could change the landscape of mobile payments and thwart the long-hyped but little-adopted mobile wireless technology Near Field Communications, or NFC. At the same time, Apple Inc. has unveiled iBeacon, which uses the same underlying technology—Bluetooth wireless networking—as PayPal Beacon. If Apple were to link its iBeacon with payment information securely stored in its iPhone-wielding customers’ iTunes accounts (there are 575 million iTunes accounts, Apple says), and secure access through its new biometrics technology fingerprint reader debuted this week, it could potentially launch into the mainstream the concept of paying at a store with a mobile phone.
“Silicon Valley has anointed Bluetooth as its mobile payments technology of choice, and an all-out war against the established payments industry could be just a short time away,” says Rick Oglesby, senior analyst at mobile payments consulting firm Aite Group.
In-store mobile payments face a number of hurdles. But the bottom line boils down to this: Is a mobile payments method easier than swiping a credit card? Because if it’s not, consumers are not going to bite. And so far, with every style of mobile payments, it’s still easier for a consumer to whip out a card and run it through a card reader.
PayPal, however, may be the first company to create a mobile payments method that is easier to use than credit cards. With PayPal Beacon, all a consumer needs to do is have her smartphone—with the PayPal app onboard and Bluetooth turned on—in her pocket or purse. A small PayPal Beacon device in-store senses when a consumer with the PayPal app—open or closed—enters the store. It prompts the customer to check in; a customer also can set her app to automatically check in. After the customer checks in, her picture and name pop up on the retailer’s point-of-sale system. When a sales associate at the store totals a bill on a cash register or or a card-reading terminal, the customer gives verbal confirmation to the associate, who matches the customer with the picture of the customer on the POS screen and concludes the transaction.
“PayPal Beacon opens the door to a fundamentally different way to use technology to make shopping more valuable and more personal for consumers and retailers,” says David Marcus, president of PayPal, which is owned by eBay Inc. “We challenged ourselves to find a better experience than swiping a credit card. We figured the only better way to pay would be to do nothing. Just walk in a store, and, like magic, when you’re ready to pay, money is transferred securely. No wallet. No card. Nothing to do. Not even touching your phone.”
The key to PayPal Beacon is the latest in wireless technology, Bluetooth Low Energy, or BLE. Bluetooth enables devices of any sort, from smartphones to stereo components, to communicate wirelessly at a close range. BLE enables mobile devices to operate with Bluetooth networking always turned on without the technology consuming a lot of power from the battery. Of special note is the fact that PayPal Beacon can function without a connection to a cellular phone network, as all the data transfer happens via BLE and the retailer’s point-of-sale system.
Bluetooth typically is off by default on most smartphones and tablets, in part because it consumes so much power. However, BLE can be found on iPhones (starting with the 4s) and many Android smartphones. Consumers can leave it on all the time so it can detect such things as beacons and whatever new services and offers developers and retailers dream up.
“PayPal’s approach of creating a solution that can be integrated into a merchant’s systems on the merchant’s own terms is good, but it will take some time as app developers figure out what to do with this technology,” Oglesby says.
PayPal says it soon will roll out the PayPal Beacon mobile in-store API for 100 developers “to imagine ways to make the shopping experience better, from being able to self-checkout on your mobile phone to automatically placing a customer’s usual order as soon as they walk through the door.” Developers can get a chance to experiment with PayPal’s API and a developer version of the PayPal Beacon device by submitting their ideas at PayPal.com/Beacon.
When it comes to PayPal Beacon and in-store payments via the PayPal app, consumers will have full control of stores where they want to check in, stores where they want to get prompted to confirm payment, and stores where they want to enable a completely hands-free experience. “We value our customers’ privacy, so PayPal Beacon won’t constantly track a user’s location,” PayPal says. “If a consumer enters a store and declines to check-in, or just ignores the prompt entirely, no information is transmitted to PayPal or the merchant.”
For retailers, any store running point-of-sale systems compatible with PayPal, including Booker, Erply, Leaf, Leapset, Micros, NCR, PayPal Here, Revel, ShopKeep, TouchBistro and Vend, and many more soon, PayPal says, can simply plug a PayPal Beacon device into a power outlet. “Beacon-enabled shopping experiences will be available through PayPal’s consumer app, which will be updated next year when we fully roll out PayPal Beacon with retailers,” a spokeswoman says.
Apple has included what is coming to be known as “beacon” technology in its new iOS 7 mobile operating system, which rolls out Sept. 18. Called iBeacon, it uses Bluetooth Low Energy wireless technology, like PayPal Beacon, and can be incorporated into apps. Stores plug in sensors that constantly look for iBeacon-enabled apps. When sensors detect an app, they notify store systems that then send retailer messages, such as coupons, through BLE to the app.