Paypal is looking to expand even more to the offline payment system, now with your smartphone. Move over Square? Hit the jump on the rumor about Paypal.
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EBay Inc.’s EBAY PayPal electronic-payments service is further tapping into the bricks-and-mortar retail industry by releasing a credit-card reader that small merchants can use on smartphones.
EBay Chief Executive John Donahoe announced the device at a San Francisco event Thursday. The triangular credit-card reader, which plugs into a headphone jack and resembles a paper football, will compete with a square-shaped credit-card reader from San Francisco start-up Square Inc. that has become popular with food-truck vendors and cabdrivers.
The move comes as PayPal, which started out as an online-only company, increasingly is moving into physical stores. PayPal’s service has long been a staple on retail websites, giving Web stores a way to process payments without having to set up their own system. PayPal takes a small cut of a retail transaction.
PayPal is now eyeing the 93% of the overall U.S. retail industry that takes place offline, according to data from Forrester Research. In January, PayPal launched a pilot project that lets customers pay at Home Depot Inc. HD stores without cash or a conventional credit card. The service will eventually let people pay for items with their smartphones.
In an interview, Mr. Donahoe said that the company plans to roll out the service “like the Russian army” to other major retailers this year.
PayPal has been eBay’s strongest business unit in recent years and Mr. Donahoe said it could become the San Jose, Calif., company’s biggest division by revenue in a few years. PayPal revenue grew 28% to $4.4 billion in 2011, accounting for 38% of eBay’s revenue that year.
The credit-card reader, which PayPal will give away free, targets smaller merchants. PayPal will charge a 2.7% fee on credit-card and debit-card transactions, compared with Square’s 2.75% fee. PayPal will also give 1% cashback to merchants who later use a PayPal debit card to purchase items for their business.
Merchants can also snap pictures of credit cards and even checks to process those payments. Square doesn’t process checks.
A spokesman for Square declined to comment.
PayPal also released a new feature that allows plumbers, for example, to send digital invoices to consumers, who can also pay electronically. The service will start in the U.S., Canada, Australia and Hong Kong.
