PayPal’s vision for the future of digital payments
PayPal is plotting a future for its digital payment ecosystem ahead of its planned split from eBay.
Yesterday at its Rewired event in San Francisco, the company announced a new feature that will allow users to pay with its single touch payment option in mobile apps without having PayPal downloaded to their phone. Company executives also revealed a new partnership with e-commerce platform Bigcommerce, which will add PayPal One Touch as a checkout option.
The One Touch payment feature enables users to eschew the traditional checkout process of entering oodles of personal information in favor of a single button, both on the Web and in mobile apps.
The expansion means is that if you go to pay for something in a Braintree-supported native app and you don’t have the PayPal app downloaded to your phone, but want to pay with PayPal, you can click on the One Touch button and it will push you to a mobile browser where you can log into PayPal. (Though the update gives users more ways to use PayPal in mobile, this step effectively takes the “One” out of One Touch.)
However, PayPal says you can choose to stay logged in on your phone, so the next time you want to use PayPal One Touch, you won’t have to log in again (unless PayPal detects fraud or wants to verify your identity).
PayPal rolled out One Touch mobile checkout to the Web last month, so this announcement is more of a last mile effort to connect the two.
PayPal already processes roughly $12.5 million a day for its customers, or a total of $4.3 billion annually, but the company wants to tap into the greater retail market.
“We believe that the most important trend in business right now is the convergence of online and physical world commerce through mobile experiences,” said PayPal president and designated CEO Dan Schulman in a blog post.
PayPal has more than flirted with the idea of having stores accept PayPal. In 2012 the company launched PayPal Here so offline merchants could use PayPal to process payments in store. Last November, eBay launched an interactive mirror in partnership with clothing retailer Rebecca Minkoff that let customers checkout with PayPal right from the fitting room.
While the dressing room mirror is certainly a flashy way to show off the potential of the PayPal app in the real world, the company may need to look to another one of its acquisitions to scale to physical stores. Though it wasn’t mentioned at yesterday’s event, peer-to-peer payment app Venmo may be the most natural way for the company to extend its reach.
“Venmo has the opportunity to bring the consumer piece from the Venmo ecosystem to the PayPal and Braintree merchant network, and that’s the next big thing we’re doing,” Mike Vaughan, Venmo’s general manager, told me last week.
One Touch for Venmo is already available in beta on iOS and Android on certain Braintree-powered apps like Jane.com, ParkWhiz, StubHub, and Type Tees by Threadless. Vaughan says that the One Touch experience with Venmo should officially launch in the second half of this year.
“So, in the future [you can] use your Venmo account to pay a merchant on Braintree and then beyond that … anywhere PayPal is accepted,” says Vaughan.
But then consumers may be faced with too many options: Visa, MasterCard, Discover, Venmo, PayPal, Apple Pay — the list goes on. It also pits PayPal and Venmo directly against one another.
“We’re very aware of that issue,” says Vaughan. The trick, he says, is to make smart design choices. For example, if a customer uses Venmo more often than PayPal, don’t offer PayPal One Touch. If a user doesn’t have the Venmo app downloaded, don’t serve them Venmo as a payment option. Vaughan says from a Braintree perspective, payment options are all about allowing merchants to accept whatever form of payment the customer wants to use. Braintree may end up driving a lot of the decisions when it comes to how PayPal positions its various transaction services.
Focusing on millennials
Still, Venmo plays a fundamental role in PayPal’s overall digital commerce strategy. It’s a mobile-first company, and though it may not have the same reach as PayPal, more people may be inclined to use Venmo to buy things from their phone.
Venmo also has a reputation for being popular among millennials. PayPal won’t reveal how many users Venmo has, but the peer-to-peer app saw a total payment volume of $2.4 billion in 2014. Giving users both PayPal and Venmo One Touch will allow the company to see which brand jives better with its overall user base and move ahead accordingly.
Venmo could be a very important brand for PayPal as it goes forward, not least because of the vast competition it faces in this space from formidable players like Stripe, Square, and Apple Pay. Just look at the numbers: where PayPal touts 162 million registered users, Apple boasts 800 million. Focusing on Venmo could be a way for PayPal to scoop up a younger, and ultimately broader, audience as it moves forward.
That could also mean that one day we see physical businesses accepting Venmo. But that’s not likely happening any time soon.
If you do ever want a glimpse of the future, look at the two (yup, two) restaurants in New York City that accept Venmo: Sigiri and Kottu House. One of Venmo’s founders helped set up the Sri Lankan restaurants with accounts as a pet project, so don’t think that Venmo or PayPal has aspirations to compete in the restaurant mobile payments space (yet anyhow). But these establishments do show off the app’s potential beyond peer-to-peer — even if it is far off.