Aité deems PayPal good for payment pros

Rick Oglesby, a Senior Analyst with the business technology research and advisory firm Aité Group LLC, said PayPal Inc.'s move into the brick-and-mortar merchant realm represents "a big opportunity for the acquiring space." And he told The Green Sheet PayPal's decision to focus on cloud-based POS providers that can turn on multiple markets at a time is a "no-brainer strategy" that makes inroads into a new and growing segment of the payments market.

However, he pointed out PayPal remains less a payment network than a payment brand, and in the background, PayPal is still using the traditional card brand payment rails.

Merchants need assistance

Oglesby said PayPal's big challenge is to activate the 40 million terminals to which the POS manufacturing partnerships give it access. He believes many of those terminals aren't compatible with PayPal's software solution and, therefore, represent a hands-on opportunity for merchant level salespeople. Terminals and software need support at the local level with setups and upgrades. "They are going to need ISOs," he said. "Turning things on at the VeriFone level isn't going to get them where they want to go."

According to Oglesby, PayPal's enablement of "a variety of dynamic consumer solutions and back-end solutions" in which acquirers will play a big part is potentially another benefit for merchant services providers. For instance, the PayPal Media Network offers traditional, brick-and-mortar retailers behavioral, demographic, location and contextual targeting to support local advertising, loyalty, and coupon programs. The merchant pays for this service as potential customers "click" on offers. "It should mean a lot to merchants if a retailer only pays when they get a reaction," Oglesby said.

Consumers must be on board

PayPal still has a "tough road ahead" to adoption, Oglesby said, adding that merchant adoption is only part of the equation for PayPal. For PayPal's reach into the offline merchant realm to be successful, consumers still have to adopt the PayPal payment system.

This necessitates a consumer downloading the free PayPal app and then creating a new PayPal account or logging into an existing one. Once logged in, the customer chooses the appropriate options to select the store in which he or she is shopping and get in sync with the retailer's POS software. At checkout, the consumer indicates a preference for completing the payment with PayPal. When the transaction is done, the customer automatically receives an email receipt.

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