PayPal Mobile Launches, Mobile Payments Apocalypse Upon Us, etc etc

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As you’ve probably noticed, PayPal launched its long-awaited mobile service today, ready to bring down the pain on all other pretenders to the mobile payments crown.

Or is it?

There’s little doubt that PayPal will make a big splash in the US’ nascent market; after all, that’s what big brands do. It’s got a huge base of existing users, including both consumers and merchants to draw from, and it’s got a proven, successful business. Those factors might be enough to overcome the awkwardness of its initial efforts.

There are two parts to the service: the mobile extension of its standard person-to-person payments, which can be initiated via SMS or an IVR call, and PayPal then calls back with an IVR prompt asking for a PIN number to confirm the transaction before notifying the recipient. The other is called “Text to Buy”, and as advertised, it lets users buy stuff via a text message. It works in the same way: users SMS an item code to PayPal, which then calls back to confirm, then the item is shipped to a user’s home address.

The P2P payments stuff is pretty basic, and it’s hard to see it gaining much ground — it doesn’t seem to really address a market need that’s not already answered by existing products, whether it’s currency or PayPal’s Web service. Do people really have that great a need to send each other money in a manner other than what’s currently available?

The Text to Buy side is more interesting, as it’s not hard to see how it could become a very popular payment method for some merchants. Interestingly, it doesn’t seem geared at all towards mobile content, which is where many people said PayPal could make a huge initial impact, given the large share of revenues operators take for reverse billing. It also seems geared toward payments that don’t happen face-to-face, perhaps because of the speed of the system — one reader wrote in and said it took him six minutes to complete a transaction. That’s a long time to stand at a cash register. I do think this is a fairly cool system for buying products from ads or at events, for instance. But for real-time, face-to-face transactions, it’s still too slow.

So does PayPal do better according to the rapidly-getting-famous Buckley’s First Law of Mobile Payments, which says “If the transaction process is any more complicated than using a credit card or cash, it will never succeed” than other companies like Mobile Lime or TextPayMe? Not necessarily — particularly for users that don’t have credit cards and have to keep refilling their PayPal accounts and tracking the balance, which at this point it sounds like you can still only do from a PC. The Text to Buy stuff is getting there, though.

The problem with PayPal is that by trying to be more than just a payment mechanism, they’re adding complexity in to payments. Their separate accounts and systems adds in an additional layer between users’ credit cards and bank accounts and the people they’re trying to pay. That’s why paying via reverse billing is so popular with consumers — it’s incredibly easy. No new account, no extra bill, they just pay.

The breakthrough this market is waiting for isn’t PayPal — sorry, folks — at least not in this incantation. It’s still a touchless IC platform that supports both physical and online purchases. What’s holding back mobile payments currently, for the most part, is that operator revenue share. But that’s not a technical issue or even a societal one, just a flawed business model. PayPal’s real impact in mobile, rather than its actual product, may be to force that onerous revenue share down to more acceptable levels. But any mobile payment system can’t ignore mobile content, and that’s where the biggest opportunity is. But it’s also the one place where a system will butt heads with operators — so you have to wonder if PayPal’s avoided it intentionally.

[tags]paypal, mobile, mobile payments[/tags]

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