PayPal verifies digital wallet ambitions

Now I have to confess to a minor fetish. Nothing too exciting I'm afraid - just an ongoing search for the perfect wallet.

The end result of this olympian task has resulted in a box of once favoured, long since abandoned candidates for the role.

So in many respects I should be the perfect target for the idea of the digital wallet. It'd certainly be a damn sight cheaper than another impulse purchase in Selfridges or Macys.

But according to Mark Lavelle, senior vice president of Strategy and Business Development at eBay, I might be waiting quite a while before I'll realistically be abandoning my pocketbook. He says:

"We think all the elements are there for fairly massive change. It won’t be like you think it would be. I mean I don't think everybody is going to leave their physical wallets behind any time soon."

According to Forrester Research, he's right. Forrester estimates that there will be about $90 billion spent through mobile payments in the US in 2016, but analyst Denée Carrington observes:

"To date, no third-party wallet provider has yet to achieve “broad-scale adoption” with both consumers and merchants, or, said differently, 'success' with proximity or in-person mobile payments.

"Although most consumers around the globe have used PayPal’s online digital wallet, and some may have heard of or perhaps even used its mobile digital wallet for in-person payments, adoption is still a long way from mainstream."

Nonetheless the direction of travel is clear and last week eBay's PayPal took another step down the route with the redesign of its mobile digital wallet. Among the new features:

• The ability to quickly place an order from a store's menu while waiting in line
• The option to view and pay a restaurant bill before a check arrives
• A Shop tab that highlights nearby stores that accept PayPal
• The ability to apply for Bill Me Later financing for purchases made through the app.

Paypal expects to handle $20 billion in mobile transactions this year, up from $14 billion last year as part of what Lavelle articulates as an evolving strategy:

"We’ve redone the strategy based on our view that the distinction between online and offline is irrelevant now to consumers. We are making transactions. We are buying either on a device or on a laptop or standing in front of a monitor in a store.

"Consumers[are] no longer saying 'I am an online customer' and 'offline customer', so that is definitely an established trend."

The rise of mobile tech, most notably smartphones and tablets of course, is one of the main drivers of this change:

"Where an e-commerce business used to have purchases before you went to work, at lunch time and then in the night time, when devices came in the number of purchase occasions we get just moderate through the day. We get people buying on the bus, sitting out at a break, in the middle of a meeting.

"The opportunity to go forward and have the entire purchase experience, be intermediated by a smart point of sales system, a mobile device and a cloud based wallet is the vision we see in the future."

Forrester's Carrington advises that to succeed Paypal will need to provide a better alternative to the payment methods consumers are content to use today:

"Although the new features of the updated PayPal wallet aim to deliver greater value before and during the payment moment, PayPal must demonstrate that it can meet consumers’ payment and commerce needs in a more convenient, contextually relevant, and compelling manner than the next best alternative. In addition, PayPal must deliver a compelling experience that is both reliable and secure."

Lavelle argues that the firm has "fundamentally changed" the PayPal user experience for both consumers and merchant:

"With the types of new engaging experiences we have coming up in the wallet with the things that customers can do like add credit, like add points and loyalty, like add third-party cards and the ability to innovate how the checkout experience works whether you are in a physical point of sale on a device or even the e-commerce checkout.

'We’ve opened up new areas of growth for us with our PayPal Here product that we’ve launched in five countries that allows for a mobile device to turn into essentially a cash register. We put out a mobile application that works on iPad devices that essentially a merchant can run their entire point of sale."

But there's still a way to go:

"It’s different in the offline world because we walk around with physical pieces of plastic or a paper that we feel very comfortable with. We’re just figuring out how these [mobile] devices [mean] in effect that the consumer can access their PayPal wallet anywhere.

"How does that really improve someone’s life? How does it make something easier to do and more enjoyable? What we’ve been doing over the last year is testing a variety of these cases with a number of retailers and we like what we are seeing. We like that in things like ordering ahead. There is a number of areas that we think we’ll become a tipping point for a lot of people beginning to buy using their PayPal wallet everywhere."

These real world examples are crucial to the next stage of digital wallet evolution, he posits:

"What has to happen next is to have these use cases all come together in our ecosystem, where online relationships, being able to store financial information in the cloud behind a safe and secure credential and then being able to access it whether you’re in your car, whether you’re on your iPad, whether you’re on a tablet or whether you’re in a drug store or a gas station - those things all have to kind of come together at the same time to have a meaningful change in consumer behavior."

Everything is still to play for, he concludes:

"Anytime you’ve got a smart device and a smart device and the Internet between them, anything can change. The friction is less about how do you compete against card. We don’t think about competing against card, because that would be competing against what our customers like to do. We’ll continue to do for quite some time.

"We look for ways that we can add value. You have to realize when you’re in this type of transformational shift is you don’t have all the answers about what’s going to happen.

"We are literally in a once-in-a-generation change in the payment realm. It’s probably like when we were getting P&E accounts back in the 1970s and 1980s and all of a sudden that created a massive upswing in consumers in then the United States. Your ability to either defer payment or not have cash, that is happening now."