In recent years, and more specifically since its spinoff from eBay in 2015, PayPal Holdings has undertaken a number of initiatives to join the ranks of mainstream digital payments providers. Some appear to moving the needle in the right direction, and others, not so much.
On the positive side, PayPal appears to have learned from its Venmo platform that cash—or more aptly, liquidity—is king, and that moving money out of its digital wallet is as important as moving money between digital wallets. A new feature allows consumers to transfer payments received through PayPal to a debit card in real time, as has always been the case for Venmo users. In the past, consumers had to wait one to three business days before they could access their funds. This not only failed to sit well with them; it was also a deterrent to merchant acceptance of PayPal at the point of sale. Why? Merchants, and SMB merchants in particular, want and need immediate access to their funds to pay their bills and keep their businesses running. Now they have it.
Now let’s look at the negatives. PayPal continues to come up short where its mobile wallet initiatives are concerned. Under terms of an agreement with the likes of Citibank, JPMorgan Chase, Bank of America, and Wells Fargo, financial institutions are loading their cards into the wallet and marketing it to their customers. In exchange, PayPal gains entrée into target markets served by these financial institutions—target markets it would otherwise be unable to penetrate. Additionally, a separate deal with Citibank slated to take effect later this year will give participants in the bank’s ThankYou Rewards program the option to redeem their earned points at PayPal merchants, either online or in-app.
So what is the problem? Observers have said that deals of this type can heighten consumer demand for merchant acceptance of the wallet, along with other mobile wallets, at the point of sale in bricks-and-mortar stores by increasing the wallets’ value in shoppers’ eyes. But rewards won’t necessarily entice consumers to use mobile wallets, and specific wallets won’t necessarily do the trick. Yes, consumers now have too many wallets from which to choose. It’s hard to imagine how they can comfortably have such a large number of icons on their smartphones, so from that standpoint, we can see the appeal of one mobile wallet as opposed to multiple mobile wallets.
However, consumers are still “mentally divided” when it comes to their shopping habits—in other words, they think, “I go to this store to buy X, that store to buy Y, a third store to buy Z,” and so on. Plenti, the multi-merchants rewards program, didn’t work, which begs the question of whether marketing is enough to make PayPal succeed by being the wallet aggregator. The exception to this rule is superstores, where consumers can purchase everything they need. In the case of these stores, customers would need only one mobile app or wallet, and merchants see and can calculate a true return on investment for contactless acceptance.
Observers have also noted that mobile wallets’ failure to catch on in-store stems in part from the fact that consumers have yet to see the value in them. This is all well and good, but other glaring obstacles to mobile wallet acceptance go beyond marketing and have yet to be addressed. For starters, many merchants still lack contactless payment acceptance capability at the point of sale—and without that capability, they cannot process payments made with mobile wallets. The absence of contact payment acceptance capability may also signal to consumers that paying with a mobile wallet carries risk. And as if that weren’t enough, among the small number of retailers that do accept mobile wallet payments, few utilize signage to let consumers know about it and remind them of the mobile wallet option.
PayPal Holdings will doubtless continue to seek other ways to join the ranks of mainstream digital payment platforms. Its initiatives clearly bear watching.