Some not-so-friendly words
Not every large merchant is happy to see PayPal expanding into the physical retail space, however. Back in April, Wal-Mart Stores, Inc. (NYSE:WMT)’s Randy Hargrove told Reuters that “We do not see the value proposition for brick-and-mortar merchants to accept PayPal in-store,” explaining that it would add additional cost and complexity to existing payment options. This isn’t the first time that Wal-Mart Stores, Inc. (NYSE:WMT) has balked at the idea of introducing PayPal to its physical stores, either; similar statements were made by a Wal-Mart executive at a mobile payment conference back in November.
Much of Wal-Mart’s reluctance seems centered around the fact that PayPal is typically linked to credit cards and bank accounts that customers could already use to check out. The belief is that using PayPal to pay would simply add a processor between the point-of-sale and the credit or checking account that customers were using to make a purchase. This does neglect to consider funds that are held in PayPal accounts that come from other sources, however; eBay Inc (NASDAQ:EBAY) sales, gifts from friends or relatives and even some forms of online work can net you funds in your PayPal account that are completely unrelated to the bank and credit accounts that you’ve linked to your PayPal account.
So will anyone use it?
Both PayPal and Discover Financial Services (NYSE:DFS) want to get PayPal payments in as many stores as possible. PayPal already does big business, accounting for around $175 billion in commerce payments in 2012. As the service becomes a payment option in more stores, it opens it up to millions of additional potential customers who will simply need to enter a phone number and PIN to pay. The company is so serious about trying to get new retailers to adopt it as a payment option that company president David Marcus has even gone on the record as offering to cover credit card processing costs for the rest of the year for small businesses that adopt PayPal. If the partners hit their 2 million store goal for the end of the year then it’s likely just the beginning of PayPal’s expansion.
Getting companies to accept PayPal as a payment option is the easy part, however. The bigger problem is getting people to use it. While the service was being tested at The Home Depot, Inc. (NYSE:HD) stores, managers reported that most customers still chose other payment options even though they were aware that they could use PayPal. While marketing might make PayPal seem like a more attractive payment option in time, the company will have to overcome force of habit and preferences for using other payment options. It may even be competing against itself since PayPal offers a MasterCard Inc (NYSE:MA)-branded debit card that offers 1% cash back on purchases.
It’s all but assured that PayPal will continue its expansion into the real world with Discover Financial Services (NYSE:DFS)’s help. In time it may even be available as a payment option at Wal-Mart if it proves successful enough. But before that can happen, the companies will have to figure out how to get people to choose PayPal over the more-familiar options that consumers have been using for years.
The article Why Can’t We Be Pals? originally appeared on Fool.com.
John Casteele owns shares of Wal-Mart Stores. The Motley Fool recommends eBay. The Motley Fool owns shares of eBay. John is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.
