PayPal, Others Picture Payment Convergence

The new PayPal Here smartphone-enabled charge card reader is the latest sign of how electronic payments will probably change, ridding retailers of most business compliance requirements, enabling easy payment processing solutions, and consolidating variable or multiple processing charges.

PayPal Here is a smartphone application and credit card reader — comparable if not identical in concept to Square — aimed at assisting small companies accept and process payment cards from physical store locations.

“The new company,” according to PayPal’s official press release,”carries a free app and fully encrypted thumb-sized card reader, which turns any iPhone, and shortly Android smartphoneinto a mobile payment solution. With PayPal Here, small businesses, service providers, and casual vendors can send invoices or take credit and debit cards, checks and PayPal using one simple product.”

The PayPal Here card reader attaches to an iPhone for card present transactions.

Payment Convergence

Although PayPal invoices its Here service as”the world’s first international mobile payments solution which enables small businesses to accept just about any form of payment,” that description is, possibly, puffery as there are a few similar services and because”almost any kind of payment” is ambiguous. But PayPal here’s a recent sign that payment convergence is really a trend that could have a substantial effect on how merchants and shoppers socialize.

Eliminating PCI Responsibilities

The PayPal Here service — and comparable solutions — will need to assist merchants deal with Payment Card Industry (PCI) standards.

Without debating the merits of the PCI standards or whether they are fair to merchants, it’s apparent that for services such as PayPal Here to be prosperous, those services will have to absorb most if not all the PCI compliance requirements on behalf of vendors. If this were not true, PayPal could hardly expect new Here clients selling widgets from mall kiosks and pushcarts — as a number of the agency’s promotional material suggests — to comply by themselves.

What is more, PayPal is supplying Here as an expansion, of sorts, of its online payment processing solutions, which reduces the work a merchant has to do to comply.

Competitive services such as the above Square, or online payment solutions such as Google Payments and Checkout by Amazon, also lower a seller’s PCI needs to almost nothing. This trend should continue as more sophisticated payment solutions have been released.

Consolidated or Lower Fees

PayPal Here fees a flat 2.7-percent fee on all transactions run through the agency’s card reader and 3.5 percent and 15 cents for card numbers typed into the application or scanned using the phone’s camera. Check processing is free. The business also promises that there’ll be no extra charges.

Likewise Square currently charges a flat 2.75-percent fee for transactions it processes.

As competition increases in this smartphone payment processing space, it’s reasonable to presume that some vendors will provide more or lower consolidated fees to get a competitive advantage. In reality, one could argue that this is the very reason that PayPal Here started with a slightly lower fee than the elderly Square services.

Easy of Pairing

PayPal This is banking on PayPal’s brand recognition to help attract clients.

“So, you are asking, how is this different from other small business mobile payment solutions? The key differentiator is that it comes from PayPal, a trusted brand in the online payments industry with over 100 million customers around the planet and years of recognized payment creation, driving growth for countless businesses internationally” wrote David Marcus, vice president and general manager of Mobile in PayPal at a blog post.

This intimate link to between PayPal Here and, well, just plain PayPal can also indicate simple integration for sellers who have both an ecommerce shop and a brick-and-mortar operation. It stands to reason that other competitive providers will also create their mobile payment and ecommerce payment solutions work well together.

Competing Firms and Technologies

PayPal Here isn’t alone in fresh the new emerging mobile payment section, and lots of competitors have already been cited, including Square.

Other competitions worth noting are Google Wallet, ISIS, Visa Wallet, Square Card Case, and Serve, which use a technology known as near-field communications to skip physical payment calls completely.

Services such as Chase’s Person-to-Person Quick Pay, which transfers money directly from a Chase checking account into a destination account, can also be a forerunner for business services which could make swiping cards obsolete.

Taken together, merchants should probably be optimistic about all the new payment solutions becoming available. For the most part these businesses and technologies should enhance the payment industry, possibly making it easier for buyers and sellers to conduct business.