PayPal goes toe-to-toe with Square as it launches mobile card reader

The mobile card payment race

PayPal is launching a mobile card reader, dubbed PayPal Here, as it attempts to attract small- and medium-sized businesses to its payment service in a move that could pose a significant threat to Square. PayPal’s triangular plug-in reader is accompanied by the firm’s software app, compatible with Apple’s iOS and Google’s Android OS, which enables merchants to process transactions, track them, and also accept cheques by taking a picture using a smartphone. Merchants that join the initiative will receive a PayPal debit card, with funds from transactions available almost immediately, although cheques will take up to six days to process. Both the card reader and app are free to merchants, like Square’s, but PayPal’s 2.7% transaction fee undercuts the 2.75% that Square takes, as PayPal attempts to muscle in on its success. 

“Consumers are changing how they shop and pay. Retailers are looking for a technology company they can trust and eBay is that company,” says eBay CEO Kevin Donahoe.

PayPal has made significant strides in recent months to bridge the gap between online and offline payments, with moves to integrate its software at major retailers’ point-of-sale terminals. This is evidenced by its trial with Home Depot, as well as initiatives such as NFC-based cards and confirming purchases with a pin or phone number on their mobile device. PayPal labelled the trial as “the beginning of a fundamental change in the company”, and a card reader would allow consumers that don’t own a smartphone or haven’t downloaded PayPal’s app to purchase goods, with PayPal snaring a share of the revenue.

The company’s move to target smaller retailers appears more aggressive, with the firm rolling out its plug-in readers and software this month, though this may have something to do with Square’s progress during the past year. Square is already establishing a strong base and recently announced that it is processing USD4bn in tractions annually. However, PayPal’s 106m global users make it an automatic threat to Square’s continuing success.

Jacob de Geer, CEO of payments firm iZettle, told StrategyEye earlier this month that PayPal’s mobile reader, would be good for the mobile payments market. “Competition is healthy and helps to increase consumer understanding about mobile payments and pushes the industry to progress quicker,” he says. Though PayPal Here will be available in Canada, Hong Kong and Australia, de Geer says a move into Europe could prove more difficult. “The chip-card market is a different kettle of fish with different security standards and regulation to comply with.”

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