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PayPal Edges Into On-Site Retail Environment

The ecommerce payment company wants to develop software to turn phones into "digital wallets."
August 18, 2010

SAN FRANCISCO - EBay Inc.��s PayPal unit is looking to cash in on the $2.4 trillion on-site retail locations, the Wall Street Journal reports. Scott Thompson, president of PayPal, said his company is developing software to turn mobile phones and other devices into "digital wallets," which will be able to purchase products, organize coupons and keep loyalty program information.

One of the goals of the new software will be to allow phone subscribers to purchase products from mobile websites via their handsets. But PayPal also would like consumers to use phones at real-world stores, given that more point-of-sale devices in retail outlets have Internet connections.

"The tide is coming in and we will take advantage of that," said Thompson. Some aspects of the software will be revealed during a PayPal conference this fall.

PayPal wants to edge into on-site payments as parent company eBay wants the firm to drive growth. If PayPal could grab some of the approximately 95 percent of U.S. retail sales that occur at stores and malls, that could shore up eBay��s stock and business.

However, MasterCard and Visa are certain to resist PayPal��s edging into this market. MasterCard has 78 million PayPass cards and tags with wireless chips in circulation, while Visa has plans to begin a pilot program of chip-based payment systems for phones in the United States later this year.

With PayPal��s in-store transaction fees much lower than MasterCard and Visa, retailers might be more inclined to give the company preference, said National Retail Federation spokesman Scott Krugman. "Swipe fees are out of control," he said. "Merchants will look at anything that creates more competition."