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Innovation in Financial Services

Innovation in Financial Services

A discussion of trends in innovation management within financial institutions, and the key processes, technology and cultural shifts driving innovation.

Is PayPal talking to a lighthouse?

12 December 2013  |  3286 views  |  0

Aircraft carrier is an awesome sight: it's huge, full of energy, impressive in all respects. It's worth a lot of money too. However, when you see an aircraft carrier on the horizon heading towards you at full speed, that means one certain thing - it is going to crash, due to its maneuvering capabilities (stopping distance, turning circle, etc.)

Good captains don't let their ships run aground, but even the best of us are sometimes talking to a lighthouse...

At the recent LeWeb conference, PayPal's David Marcus attacked NFC and praised Bitcoin. In his blog, he also made some predictions for 2014 (which reminds me to do mine - after all, I got 6 out of 7 right in 2014).

I'll leave Bitcoin aside (although I was surprised by his "it's a great place to put assets" comment in respect of a highly volatile instrument...) and focus on PayPal's strategic vision.

  • NFC is dead. When (not "if"...) Apple introduces NFC, what will all the naysayers do? Copy it. Ditto.
  • Traditional retail will fight back. Will people change their shopping habits just because there are "beacons" in stores?.. Offline vs online purchasing decisions are driven by specific factors which are not going away. From PayPal's perspective, the task is to be relevant in physical space (see below).
  • iOS will drive retail revolution. Sure! (no sarcasm there) However, in doing so, Apple will block the road for such companies as PayPal in physical retail.

I've seen comments out there that are predicting a bright future for PayPal in payments (some even called it "the budding 4th payments network"). I am not so sure about that. 

We haven't seen any major innovation from PayPal for years, just some copycat actions. Internally, PayPal's main strength is in fraud management. Externally, their strength is in checkout convenience. When (again, not "if") the latter is overtaken by the card scheme's wallets (or by the next-gen iTunes...), the former becomes irrelevant.

What could PayPal do to remain relevant and even gain ground? Two things.

1. "Federate" Bitcoin or offer a similar alternative. (JP are already on it...)
2. Develop EMV "iWallet" (a physical device) before Apple, Google, Samsung, Square or Coin do it.

Anything else is just a corporate chest-beating.

TagsBlockchainPaymentsInnovation

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