When you fancy something in at a department store, do you reach for wallet or grab your phone?
Darrell MacMullin, general manager of PayPal Canada believes it won’t be long now before many Canadians will start using smart phones to pay for purchases.
And when they do, he hopes they’ll be making their mobile payments via PayPal, an e-commerce system that allows payments and money transfers to be made online.
MacMullin paints the following scenario:
- Consumer spots a nice pair shoes at a store
- Consumer ask for the item
- At the counter, consumer pulls phone, connects to PayPal account and transfers appropriate amount of cash to store’s PayPal account
“No changes to count, no cards that could be stolen,” he said.
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The growing popularity of Web-enabled smartphones and person-to-person transactions on social networks, such as Facebook, will be key drivers of mobile payment adoption, MacMullin told ITBusiness.ca.
For instance, he said, many youth have taken to paying one another through PayPal on Facebook or with their smart phones. “If you borrowed $20 from a friend the night before at a bar, it’s easy to pay him next day through your PayPal account.”
When mobile payment does gain critical mass, the PayPal manager said it might even become the last nail in the coffin of the venerable paper cheque.
“Cheques will eventually become obsolete as small and mid-sized businesses migrate to new online invoicing tools that enable instant payments.”
Miles to go
MacMullin, however, admits that mobile payment adoption has some way to go in Canada. “We’re still in the very early stages compared to countries in Europe and Asia, but we’ll get there soon enough,” he said.
Much of the technology that supports mobile payments is still in its development phase.
For example, smart phones are just a few years old and PayPal applications have only been available since last year for the iPhone and about six months ago for the BlackBerry.
One Canadian technology analyst agrees that mobile payments can potentially become more convenient and safer alternatives — but wider acceptance of the system is a pre-requisite.
Mobile payment’s adoption is more likely to mirror the merchant community’s acceptance of PayPal, according to Carmi Levy, an independent technology analyst.
“For mobile payments to take hold, a de facto financial exchange system must be established. This could be PayPal, but so far many bricks-and-mortar stores have yet to set-up PayPal accounts.”
Integration into vendor point-of-sales systems is critical for PayPal to make it in the market, he said.
Broader smart phone penetration is also needed, Levy said.
“Currently mobile penetration in Canada is only around 67 to 70 per cent, compared to 85 per cent or more in the U.S., and somewhere in excess of 90 per cent in Europe and Asia,” he noted.
MacMullin said his firm has had challenges getting people to switch to PayPal in the past.
For instance, since 2006, the company had used text messaging and wireless application protocols to facilitate mobile payment. “At that time, the right technology, vendors, and consumers interest had not yet reached the ideal level.”
But he said today PayPal has evolved into a popular Canadian online payment tool used by more than eight million Canadians.
Fresh start with FreshBooks
And the importance of capturing the point-of-sale arena is not lost on PayPal.
In fact FreshBooks, the Toronto-based outsourced online billing service, was recently certified as an integrated application for PayPal’s Express Checkout and Web site Payments Pro.
MacMullin said companies using FreshBooks for invoicing can now accept payments made through PayPal.
He said PayPal is ideal for consumer activities as well as business-to-business transactions because the system adds another layer of security to the payment process.
Over the years, he said, the firm has developed fraud detection and prevention procedures for online transactions.
Furthermore, although PayPal accounts are tied to a user’s bank or credit card account, financial information from these instruments are not visible or passed around when a PayPal transaction is made, MacMullin said.
Merchants and B2B clients also benefit from instant payment, he said. “Businesses often have to wait several days for cheques to clear. With PayPal they get the money in their account instantly.”