PayPal takes potshots at mobile wallet

PayPal takes potshots at mobile wallet

PayPal has taken a sideways swipe at emerging mobile wallets from the likes of Google and Isis, saying that they are trying to solve a problem that doesn't exist.

Writing on the PayPal corporate blog, Anuj Nayar, senior director, global communications, argues that emerging payment brands like Google and Isis - and by implication most of the bank/telco trials underway - are scrapping to build a product that consumers don't need.

"Mobile wallets don't solve any customer pain points by themselves," he writes. "They don't offer intrinsic advantages over swiping a credit card or heaven forbid, paying cash. To gain mass adoption it has to be better, not just different, from what we do today. And your mobile phone just won't cut it."

Rather, says Nayar, the mobile phone has to be seen as a ubiquitous tool that can be serviced from the cloud to simplify the shopping experience for consumers, by feeding on geo-location and transacational data to offer up deals and coupons for both online and offline shopping as and when they are appropriate.

"Consumers need to see the value in order to switch from what they do today." he says. "That value can't just be a different way to do pay. It has to be better. It will be provided courtesy of cloud computing - not on a chip in your phone."

For this reason, insists Nayar, "do not call PayPal a mobile payments or mobile wallet company...We do not want to be lumped into a category where people are using technology to create solutions that are not solving a problem."

Comments: (10)

A Finextra member
A Finextra member 15 October, 2012, 15:38Be the first to give this comment the thumbs up 0 likes

If one calls an apple an orange, that doesn't change anything.

PayPal have a good product which now can be (and is being) replicated. They missed - for various reasons - the mobile "momentum", and now behave erratically.

Copying Square was nothing to be proud of. Introducing own payment terminals in retail is a dubious strategy. PayPal are trying to find a role in the mobile payments ecosystem - denying such an ecosystem exists is not the best way forward. Talk of a blind man in a dark room looking for a black cat which isn't there...

A Finextra member
A Finextra member 15 October, 2012, 15:461 like 1 like

Is finextra opposed to posting hyperlinks?  As much as I enjoy the editorials that finextra posts, there are times (like this one), where I would like to read the underlying story for myself.  

For some reason, however, finextra NEVER hyperlinks to the article that they are commenting upon.  In the age of the world wibe web, that's either unforgiveable laziness or pure incompetence.   Hell, it also helps finextra in terms of SEO.


A Finextra member
A Finextra member 15 October, 2012, 15:57Be the first to give this comment the thumbs up 0 likes

The message of the original article is indeed somewhat different, but still...

PayPal claims to be THE (mobile) wallet. Yet, they are not that much different from iTunes, Amazon or Google - from "Pay with XXX" point of view (PayPay is not the largest "wallet" either, in terms of number of registered users).

Compared to conventional cards, they do represent a convenient and secure option for online payment. But no more convenient or secure than, say, iTunes (PayPal is more ubiquitous, though).

However, the offline world is a different story altogether.


A Finextra member
A Finextra member 15 October, 2012, 16:07Be the first to give this comment the thumbs up 0 likes

Alexander, actually iTunes and its relative payment mechanism is a step ahead of Paypal, from the point of view of the user experience. 

Paypal is still a good platform on mobile (for m-commerce: remote B2C transactions) as it 'just' requires user name and password, but it is no more than just an online payment method brought to the mobile screen.

The initiatives that they launched in store (in the UK) however are absolutely great. The ones in the USA with Office Depot seem to be stemming from the 1990s: cumbersome and useless. 

Copying square is just a mechanism to defend themselves, it's not the first mover, but they need to preserve the brand identity.

I somehow have the impression that Paypal mobile will become far more advanced in Europe than in the USA.

Paul Penrose
Paul Penrose - Finextra - London 15 October, 2012, 16:172 likes 2 likes

Hyperlink now included. NB, Finextra often posts links where appropriate. On this occasion not "laziness or incompetence", just an oversight on a busy news day.

Philip Harrison
Philip Harrison - - London 16 October, 2012, 10:14Be the first to give this comment the thumbs up 0 likes An important differentiator between iTunes and PayPal as payment mechanisms (irrespective of their relative market shares) is that iTunes is fundamentally a closed loop payment mechanism (underpinned by other payment services such as Visa and MasterCard) selling a fixed catalogue of digital downloads, whereas PayPal is a more open loop payment scheme seeking to increase its openness. Let's wait and see if iTunes turns open loop any time soon... Philip Harrison
Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 16 October, 2012, 19:21Be the first to give this comment the thumbs up 0 likes

I agree with PayPal: Moving the form factor of credit / debit card from plastic to a mobile is neither solving a pain nor providing a gain. Now, it would be a different matter if mobile payments bypass the card networks and banks altogether and work on MNO billing or some other alternative rails. Boku, Zong and a few others are doing this but, with transaction fees as high as 20-40%, they've only been able to make limited headway in virtual goods and other high-margin items. I doubt if they'll ever gain mass adoption in the mainstream market where merchants are complaining about the relatively measly 2% interchange fees charged by card networks.

Pat Carroll
Pat Carroll - ValidSoft - London 17 October, 2012, 12:25Be the first to give this comment the thumbs up 0 likes

“When Anuj Nayar of PayPal says that mobile wallets don’t solve any customer pain points by themselves and that ‘your mobile phone just won’t cut it’, I think he’s missing the point completely

“Around two third of the world’s population don’t have a credit card or bank account and the potential for mobile to fill that gap is huge. According to the recent World Payments Report (here), the number of m-payments users worldwide surpassed 141 million in 2011. That’s a 38.2% increase from 2010.  But, again according to the report, still only 2.1% of all mobile users making payments via mobile, so the potential for additional growth is huge.

“The future is also rosy for mobile wallets because of the high percentage of low value payments that are still made by cash, rather than card. Apps and wallets are here to stay and there’s huge potential for those low value transactions to be moved to mobile. That’s exactly what’s happening in emerging economies; you just need to look at the success that mobile payment infrastructure providers such as Utiba are having.

“Plus, mobile telecommunications is already cloud based, so it’s easy to enhance the shopping experience by feeding on geo-location and transactional data. After all, paying over mobile is all about consumer experience. The big question for me is how to balance customer convenience and trust, as security is the one thing that engenders trust and increasingly expected by consumers. It quickly becomes a differentiating factor if it’s thought to be lacking.”

A Finextra member
A Finextra member 17 October, 2012, 12:31Be the first to give this comment the thumbs up 0 likes

Dear Pat,

i'd like to point out the fact that you refer at 'mobile payments' as a whole. The Capgemini report might be right with the numbers, but with its definition, the same figure includes users of M-pesa and of Google Wallet. Do you think this is a correct way of addressing the problem?

I'm far from having a clear solution to this debate, but in our Mobile Payment report 2012, we introduced our way of thinking and defining those transactions, based on the relative location and roles of the payer and payee.

you can read it here:

Ketharaman Swaminathan
Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune 17 October, 2012, 17:14Be the first to give this comment the thumbs up 0 likes

As I'd pointed out earlier, barring a few exceptions like Boku and the PayPal-owned Zong, most service providers continue to use the existing card / banking rails for mobile payments. This is either because of regulation (e.g. India) or the infeasibility of creating alternative rails to match card rails that have been around for decades. As long as the status quo continues, adoption rate for mobile payments is restricted to the number of Card / Internet Banking / Mobile Banking accounts. The billions of mobile phone subscribers doesn't really mean much. For example, while there are some 600M mobile phone subscribers in India, only around 20M qualify to use the recently-launched Instant Mobile Payment Service (IMPS).