PayPal has been working hard to be more than a blue button on an e-commerce site. The 18-year-old payment platform that left its longtime home at eBay Inc. last year has been focusing on products that streamline payments for both merchants and customers — often in the background and often with a mobile mind-set.
The emphasis on on-the-go commerce comes at a time when customer needs, and competitive threats, are growing. Behemoths like Amazon, Apple and Google have expanded their scope and spilled over into PayPal’s domain. An estimated 45 percent of all shopping journeys include mobile devices and U.S. mobile commerce is expected to reach as much as $252 billion by 2020. But digital merchants are in many cases struggling to play catch-up and deliver a check-out process suitable for the small(er) screen. To that end, PayPal’s One Touch landed two years ago to reduce “friction” in digital checkouts by automatically authenticating customers on their chosen device.
The company’s transition out of eBay was led by flip-flop- and cowboy boot-aficionado Dan Schulman, who came to the San Jose-based company from American Express in 2014. WWD talked to Schulman in advance of PayPal’s one-year anniversary as a stand-alone company, coming in July, to get his thoughts on the past year and the future of mobile payments.
What’s changed the most since PayPal became independent from eBay?
Some things haven’t changed. We are still focused on what we do best, which is digital payments and serving customers and merchants.
What has changed is that we are truly a neutral third party. We are not aligned with an e-commerce site. Ebay was a competitor to many merchants and even some technology platform companies. Being that neutral third party has allowed us to open our aperture to numerous partnerships that we might never have had before. Those range from deep integration into the Facebook platform, deep integration into some of the largest wireless carriers around the world in Europe, Mexico and Latin America, and some very deep relationships with retailers that we wouldn’t have had if we had been aligned with eBay.
That was one of the big premises of the separation: Could we take advantage of third-party status? I think we’re beginning to show that that’s clearly the case. We are clearly moving away from being more than just a button on a merchant’s web site. Our mission and our vision is much more expansive and has mobile at the center.
Payment tech is a crowded market. The technology is there, but so far it seems like customers haven’t adopted mobile payment services as quickly as many hoped. How is PayPal competing to stand out?
Mobile payments are not about a form-factor change. They are about a value proposition change. They are not about substituting a swipe of a card for the tap of a phone, because it’s pretty easy to swipe a card.
A value proposition is fundamentally different. What merchants are thinking about is, how can they use mobile to form a more intimate connection to their customers by putting them at the center of a new value proposition that transverses online, mobile and in-store environments? Mobile is the technology that is blurring the distinction between online and offline.
Many retailers are using the fact that everyone has their mobile with them all the time. Merchants are writing their own applications, like the Starbucks app. People don’t use it because they want to tap their phone and show a QR code. They use it because it gives them a free coffee after the tenth purchase and it allows them to order ahead and skip the line.
We are enabling that value proposition change. We are powering, through our platform, all the elements that a merchant needs to connect their application to. We’ll do a 100 percent share of their checkout. We will integrate simply, with very little code change needed on the merchant’s part, Visa, MasterCard, any debit card, American Express, Apple Pay, Android Pay and, of course, PayPal, onto their payments and checkout. We allow them to take their rewards and integrate them onto our platform so that at checkout, a consumer can use their rewards points to pay for something instantaneously.
Two years ago, PayPal introduced One Touch, which helps digital shoppers log in and pay without repeatedly entering usernames or payment information. It has since expanded from mobile apps to web and mobile usage and is available internationally. How’s that doing?
It is the fastest-growing product that PayPal has launched; over 22 million people are using it.
For several years, mobile has overtaken the PC as the way that people do their computing and conduct commerce. And that is growing. In the developing world, it’s sometimes their only computing device. This offers tremendous opportunity for merchants to connect with consumers. But the real problem is that actual conversion is much lower than on a desktop; there is this huge drop-off. It’s a scary thing.
Being a mobile-first company, One Touch was about, how can we actually increase [conversion]? As soon as you opt in with one of your devices — a mobile phone or laptop or desktop or iPad — you never need to put in your username or password again. That takes away friction for a consumer. When you see something you want, you hit one button, and you have checked out. Conversion jumped to 87 percent as a result. The next nearest, our nearest competitor, was 56 percent.
From a merchant perspective, sales conversion goes to this extraordinarily high level on a device where it used to be the lowest. That is an extraordinary thing for merchants and consumers.
Where do you see your biggest growth with this?
We started in the U.S., but we just rolled out to merchants in over 144 countries and to consumers in every county in the 200-plus countries that we operate in. We are seeing the uptick of opting in across the globe. That is important, because 25 percent of our business is enabling cross-border trade and e-commerce, which is one of the big frontiers.
Part of the reason that customers feel so comfortable using PayPal is because we guarantee that transaction. If we are shopping at Nordstrom, a guarantee there probably isn’t as important as if you’re shopping in Greece or some country in Asia and you maybe don’t know that retailer.
Speaking of security, some say it’s not a matter of “if,” but “when” there will be a breach. What’s your answer to increasing customer confidence in security?
Security comes down to the basics: great firewalls and authentication methodologies. What really differentiates one company’s security from another is the scale of the data they have.
There are a lot of compromised credentials in the world, but what you need to do is spot behaviors that are not normal and prevent those behaviors from happening. You need incredibly strong algorithms to instantaneously spot abnormal behaviors. And algorithms are only as strong as the amount of data that they have to look at similar situations and to make the determination if it’s a good or a bad transaction.
This past quarter, we put 1.4 billion transactions through our platform. We look at every transaction and put them through incredibly sophisticated algorithms that can crunch through immense amounts of data to provide world-class risk capabilities.