PayPal Says Its In-Store Payments Service Is Safe
16 Febbraio 2012 - 7:43PM
Dow Jones News
PayPal said Thursday the financial information of customers
using its in-store payments service is safe a day after a Visa Inc.
(V) executive suggested it lacks security.
The comments underscore the high stakes traditional credit-card
companies are placing on digital payments, a market also being
targeted by the likes of technology companies Google Inc. (GOOG),
PayPal parent eBay Inc. (EBAY) and Verizon Wireless. PayPal is
testing a service in some Home Depot Inc. (HD) stores that allows
customers to make purchases by typing in their mobile phone number
and a personal-identification number. Visa is testing its own
"digital wallet" service that could be used to make purchases
online and on mobile devices.
"I think there's real issues around security," Jim McCarthy,
global head of product at Visa, said Wednesday of PayPal's new
service at a Goldman Sachs conference in San Francisco. McCarthy
suggested someone could gain access to a customer's personal
information when using PayPal to make a purchase in a physical
retailer.
PayPal began testing a service in January that allows its
customers to make purchases with their PayPal accounts in stores
instead of swiping a card or handing over cash. The customer can
facilitate a transaction by typing in their mobile phone number and
a PIN into the merchant's terminal. The service is currently
available in 51 Home Depot stores, and PayPal expects to expand it
to 2,000 Home Depot stores next month, according to Anuj Nayar, a
spokesman for PayPal.
"PayPal is leading payments innovation for frustrated merchants
and consumers limited by legacy systems and approaches," Nayar said
in an email Thursday, adding that the company is "responding today
to what merchants and consumers are crying out for."
"With PayPal, your financial information can't be lost or stolen
from your wallet, your card or on your phone," Nayar added. "It's
safer in the PayPal digital cloud than in your pocket."
A spokesman for Home Depot referred inquiries to PayPal.
McCarthy on Wednesday gave an example of someone watching a
customer entering her mobile phone number and PIN to conduct a
transaction, thereby gaining access to the customer's PayPal
account. He also questioned whether PayPal has the technological
infrastructure to handle a high volume of payments. "We're now
capable of doing 20,000 transactions a second in real time,"
McCarthy said, adding he doesn't think PayPal is "capable of doing
what we're doing at scale."
PayPal processed more than 5 million transactions a day and
about $120 billion in global online payments volume in 2011, Nayar
wrote Thursday. "We are confident that we can scale PayPal
innovation to meet the potentially exponential growth in
transactions that we may see from offline retail."
Visa and competing credit-card networks MasterCard Inc. (MA),
American Express Co. (AXP) and Discover Financial Services (DFS)
face a slew of new competitors that are pushing or developing
services that would allow consumers to use software-based programs
to buy goods at brick-and-mortar merchants and online. While many
of the services would allow customers to fund accounts with
existing credit cards, they also risk diverting transaction volume
away from the networks.
PayPal, primarily a service for paying for goods on desktop and
mobile websites, allows customers to fund their accounts through
existing bank accounts as well as cards from Visa, MasterCard,
American Express and Discover. About half of transactions made with
PayPal are funded with cards, according to analysts.
Rod Bourgeois, an analyst with Sanford C. Bernstein & Co.,
wrote in a research note Monday that PayPal isn't likely to gain
"significant payments volume" in physical merchants in the next
couple of years. However, PayPal is likely to compete with
traditional card companies by undercutting fees, known as
interchange, that merchants pay to accept the traditional networks'
cards.
"We see PayPal partly as a pawn that merchants can use to exert
pressure on" Visa and MasterCard "and the interchange rates they
control," Bourgeois wrote.
Visa and MasterCard set the rates, but the fees are collected by
the banks that issue their cards.
"We intend to offer competitive pricing to merchants at greater
value compared to the existing legacy providers and potential
PayPal imitators," Nayar wrote.
Visa and other card companies are developing their own mobile-
and online-payment services.
Visa is preparing to roll out V.me, a service that would allow
customers to pay for purchases on mobile and traditional websites
by entering a username and password instead of typing in their card
number for every transaction. The software would allow customers to
fund purchases with their Visa-branded cards as well as those from
other networks. Eventually, V.me could be used to make purchases
with mobile phones at physical merchants using a technology called
near-field communication, or NFC, which would allow a customer to
tap a smartphone against a contactless terminal to complete a
transaction.
Visa Chief Executive Joe Saunders said last week the company
will be testing the service with a "few brand-name merchants" in
the coming weeks and is in discussions with more than 100 major
merchants about further tests.
Visa has also said it will work with Google, which rolled out
its mobile-payments service Google Wallet on some Android
smartphones last year, as well as Isis, a competing service being
developed by AT&T Inc. (T), T-Mobile USA and Verizon Wireless.
Currently, consumers can use some MasterCard-branded cards issued
by Citigroup Inc. (C) to fund Google Wallet.
-By Andrew R. Johnson, Dow Jones Newswires; 212-416-3214;
andrew.r.johnson@dowjones.com
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