UPDATE-PayPal tries to lure retailers to mobile app

November 2, 2011

(Updates to explain “secure element” issue. Changes in bold in paragraphs 10, 11)

Online payments firm PayPal is so keen to get mobile payments off the ground it has taken the unusual step of opening a Manhattan dummy store that demos how the app can be used (pictured at right).

It’s  idea is to demonstrate the application to merchants at the “store” between now and February.

PayPal’s head of mobile payments, Laura Chambers, said merchants have given a “very enthusiastic” response to PayPal’s plans for the wallet launch next year. The eBay unit  promises to reveal a pilot merchant partner by year end.  But Chambers was not ready to name any merchants or even any retail sectors that are interested in supporting the app in an interview at the downtown showcase.

In the meantime it will finally launch a PayPal app for Android phones that lets users tap their phones together to exchange money. The app, which the company already showed off as early as June this year, uses a peer-to-peer version of Near Field Communication, a short range wireless technology.

Other U.S. companies such as Google and the four top U.S. mobile network operators are throwing their weight behind NFC – a technology they plan to use to allow consumers to pay for shopping by simply waving their phones at a check-out terminal in stores.

But Chambers is very cautious about NFC.

“It’s three to five years out before NFC is at scale,” she told Reuters noting that it will take off much more slowly than many people expect.

The problem is partly due to merchant reluctance to invest in the required equipment upgrade, and to industry infighting over who should pay for the wireless transaction. Do the banks pay the operators, which will be in charge of providing the NFC phones to consumers? Or should the onus be on merchants or payment networks like Visa or Mastercard to pay.

“That’s going to be one of the big challenges,” said Chambers who noted that none of these parties are excited about being the one to foot the bill for mobile transactions.

For NFC to work at the point of sale — where a shopper would wave their phone at the checkout to make a purchase — a payment app like PayPal’s would need to communicate with the phone’s so-called “secure element” where user data like credit card details are stored.

On top of it,  wireless operators and phone makers are wrestling for control of the secure element, said Chambers. She noted that person-to-person payments in PayPal’s Android NFC app would work without access to the secure element.

“Because there’s so much flux with business models we’re still exploring the right way to do it,” Chambers said.

Meanwhile Google’s only carrier partner Sprint Nextel has launched one phone with an NFC chip. Isis, a venture of Sprint’s biggest rivals, has said it will launch NFC services in the first half of next year. But Isis, run by Verizon Wireless, AT&T and T-Mobile USA, has yet to announce its initial bank partners and what form exactly its first service will take.

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PayPal (which is owned by eBay) is for fools that don’t mind getting the shaft!!!

Posted by Dude7 | Report as abusive