e-Bay‘s (NASDAQ:EBAY) PayPal is taking its point-of-sale initiative to Australia. The service will be similar to its U.S. offline initiative that allows customers to checkout using PayPal at select retail store locations. Four leading retailers will lead the roll-out of the service. During the first nine months of the current fiscal year, PayPal’s total payment volumes (TPV) grew by around 25% through merchant services and by 15% on eBay. Merchant services constitute about 65% of TPV for PayPal and a successful global roll-out of its offline initiative will help the division sustain the approx. 30% y-o-y growth in revenues it has seen over the past few quarters.
The service works through the PayPal app that customers can use to check-in to the store. They can then place an order and pay using their PayPal account. The merchant will be able to see the name and photo ID of the checked-in customer via its point of sale terminal for security purposes. PayPal has tied up with point of sale technology companies such as MICROS, Island Pacific, Kounta and Vend and will soon add more retailers and hospitality partners into the mix. You can see the greater functionality of the service in this video posted by PayPal on its YouTube channel. The initiative is part of the company’s overall efforts to keep customers engaged even when they are offline.
Currently, PayPal has about 117 million active users, and we expect it to beat its own conservative target of 120 million. The company has been testing various innovative methods in several countries. In Amsterdam’s shopping district De9 Straatjes, shoppers can scan QR codes affixed on shop windows and will be redirected to the mobile website from which purchases can be made using PayPal in just one click. In the U.S., it has tied up with Discover Financial Services (NYSE:DFS) to allow PayPal customers to access their accounts at any register where Discover is accepted and pay using their mobile phone numbers and PayPal PINs instead of card or cash. In addition to these mobile-based services, there is PayPal Here gadget which can be used by smartphone savvy merchants to swipe cards to receive payments and do away with traditional cash registers.
PayPal’s recent growth trajectory and the new initiatives could result in the division overtaking Marketplaces as the biggest revenue generator for eBay. Amid the spurt in innovation and new product launches, the division is also cutting jobs (2.5% of its workforce) and consolidating various product and technology groups to stay nimble and profitable.
We believe that PayPal’s offline initiatives will gain popularity overtime as they help offline retailers gather data about their customers and thus influence their behavior to an extent like online retailers.
We currently have a $50 Trefis price estimate for eBay, which is at par with the market price.