(This article was originally published Tuesday.)
By Andrew R. Johnson
PayPal has struck a deal with one of the largest providers of
retail-checkout technology to distribute loyalty offers and other
services to consumers through physical merchants.
The deal with NCR Corp. (NCR), expected to be announced Tuesday,
is the eBay Inc. (EBAY) subsidiary's latest effort to spur adoption
of its in-store payments service with brick-and-mortar retailers--a
relatively new frontier for PayPal.
"We're going to be in millions of locations," Don Kingsborough,
a vice president with PayPal, said Monday night during a briefing
with reporters.
Known primarily as a service allowing consumers to purchase
goods online through accounts that can be funded with existing
credit and debit cards as well as bank accounts, PayPal last year
embarked on an endeavor to get merchants to offer it as a checkout
option in their physical stores.
Customers can transact through merchants who sign on to the
service by either typing in their mobile phone number and
personal-identification number on a retailer's PIN pad or swiping a
plastic PayPal card. Both options allow a customer to fund a
transaction using the cards and bank accounts they have registered
in their PayPal account.
In August, PayPal announced a deal with credit-card lender and
payments network Discover Financial Services (DFS) through which
Discover is equipping its more than 7 million merchant locations to
accept PayPal. The move is intended to help PayPal rapidly expand
its footprint and bypass the need to strike one-on-one agreements
with individual retail chains.
The deal with Duluth, Ga.-based NCR will build on that
relationship, executives with the companies said, by allowing
merchants to let PayPal users to order from a restaurant's menu,
receive discounts and other functions directly through PayPal's
app.
NCR's hardware is especially common in the restaurant and
hospitality industry. The company says 38% of the top 100 U.S.
restaurant chains use its technology, and it has deployed more than
100,000 self-checkout kiosks to retailers.
Mr. Kingsborough and John Bruno, NCR's chief technology officer,
declined to discuss the companies' financial arrangement.
Deals with Discover and NCR are "critical" to PayPal's success
with physical merchants because the service needs to be ubiquitous
for consumers to adopt it, Mr. Kingsborough said.
"Wherever you're shopping you have to be able to use it," he
said.
PayPal's move in to brick-and-mortar merchants pits the company
squarely against Discover's larger card-network rivals Visa Inc.
(V), MasterCard Inc. (MA) and American Express Co. (AXP), which
have long had a lock-down on physical merchant's points of sale but
are facing increasing competition from new entrants offering what
the payments industry is dubbing "digital wallets." Such services
allow customers to aggregate card information from various banks in
to special mobile apps that can then be used to pay for
transactions. One method of doing this occurs when a customer taps
a smartphone equipped with a technology called near-field
communication, or NFC, against a merchant payment terminal that
also contains the technology.
The card networks are partnering with some of those players,
such as Google Inc. (GOOG) and Isis, a service jointly developed by
wireless carriers AT&T Inc. (T), T-Mobile USA and Verizon
Wireless. They are also offering or developing their own services
under their respective names.
PayPal said Monday it had agreements with 23 merchants to offer
its in-store service to customers as of the end of the year, up
from 16 announced in May. The retailers include Famous Footwear,
Dollar General Corp. (DG), Barnes & Noble Inc. (BKS) and Home
Depot Inc. (HD), which was the first to begin rolling out the
service last year and has since made it available in about 2,000
stores, said Dwaine Kimmet, treasurer and vice president of
financial services for the home-improvement retailer.
Mr. Kimmet said transaction volume from the PayPal service in
Home Depot stores remains "small" but is on track with the
company's expectations.
Twelve of the 23 retailers are live with the system,
representing 18,000 locations, Mr. Kingsborough said. The Discover
deal will enable it to reach about 7.2 million merchant locations
this year, he said.
Write to Andrew R. Johnson at andrew.r.johnson@dowjones.com
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