PayPal Testing Payment Systems at Brick and Mortar

You are probably familiar with PayPal for on-line shopping, which allows members to send money without sharing financial information. PayPal gives you options to make a purchase – withdraw from your checking account, use your charge, card or use money in your PayPal account. If you are selling on the internet, you can set up an account so that those purchasing from you can make payments to your bank account or PayPal account.

If you have an account with PayPal, they probably have your bank account credit card information, and PIN, but this information is not transmitted to the merchant.  This eliminates identity theft at the point of sale (POS).  You still have to be concerned about the security of your data at PayPal.

Testing at two retailers

PayPal is testing this model in Home Depot and Office Depot stores. Yes, that is correct – in the physical stores.  It has begun testing at 51 Home Depot stores in the California Bay area and one in Atlanta, and plans to offer it at more than 2,200 Home Depot scores in the U.S. by March.  It plans to expand to 20 retailers by year end.

How it works

At the point of sale, PayPal account holders type in their mobile numbers and PINs or swipe their PayPal card and enter their PIN.  The receipt is sent in an e-mail.

Using PayPal doesn’t require you to carry any credit cards; you just need a mobile phone number.  If you don’t have a mobile phone, you could get a PayPal card.  This is still targeted to those who use the internet and have cell phones.

According to PayPal, this is more secure and convenient for consumers.  You don’t have to carry your “wallet” to make a purchase but make sure you don’t carry your PIN with you.

PayPal ‘s future rollout

PayPal wants to become a player in POS and not just online. Currently, PayPal has over 103 million active accounts world-wide. They would be competing with American Express, MasterCard and Visa.  They also want to take away from cash transactions. This will take time, since PayPal doesn’t plan a massive roll out in 2012 and will be more aggressive in 2013.  It will only work, if more retailers adopt it.  Otherwise, you still have to carry your card(s) when you go to other merchant locations.

PayPal believes that by 2015 digit currency will be accepted everywhere in the U.S. and there won’t be need to carry a wallet. This may be a tall order, considering that this does require technology upgrades of hardware and software by the merchants to work with PayPal.  The payment cost savings and increase in revenue will have to exceed the cost of upgrades.

It will be interesting to watch retailer adoption rates.  This could have an impact on prepaid and debit cards.  Can you trust the security of your data at PayPal?  Will this concept be adopted by merchants?

Credit Expert Witness, John Ulzheimer, is the President of Consumer Education at SmartCredit.com, the credit blogger for Mint.com, and a Contributor for the National Foundation for Credit Counseling.  He is an expert on credit reporting, credit scoring and identity theft. Formerly of FICO, Equifax and Credit.com, John is the only recognized credit expert who actually comes from the credit industry.  Follow him on Twitter here.

Categorised in: Credit Cards, Financial, Money & Identity, Saving Money

This post was written by John Ulzheimer