If you have been in a Home Depot store in the last few months, you may have noticed a bright blue button flashing at you as you try to complete your transaction. Paypal has partnered with the home improvement giant, and has begun rolling out this new payment option at an amazing rate; already there are over 2,000 stores participating in less than 6 months! It is an interesting situation that has placed Paypal into the realm of in-person, retail payment solutions, one whose future may or may not depend on the consumer's inclination to use it.

Where is the motivation?

It is clear when looking from Home Depot's perspective. Credit card processing fees have always been a significant cost for any retailer, while providing no concrete gaurentee of payment. After all, it only takes a single employee forgetting a signature, or a dishonest patron's "dissatisfaction" with the transaction to have the money recovered from the merchant. Real monetary costs are incurred for a chargeback occuring, even if it is ruled in the merchant's favor! With all of the existing and potential costs, it is no wonder that retailers are jumping at an alternative, usable means of payment that will not only protect them from their own customers, but also gives them repreive from the fees being charged by the banks, card associations, and processors. But is this new payment alternative a reality in Paypal? Paypal is certainly less expensive for a merchant to accept. Where processing fees for typical credit card transactions are based on percentages, which fluctuate based on volume, Paypal entices merchants by charging only a flat transaction fee, allowing large volume retailers like Home Depot to significantly reduce their costs.

Will people actually use it?

One concern that consumer's have is transaction security. Visa has implied PayPal’s system poses security risks, and that identity thieves could potentially see a paying customer’s account number as they enter it in at a payment terminal. The arguement is made that while card transactions have a many failsafes to protect consumers (hence the expensive fees!)with only an account ID and password, there is little to stop a fraudlulent activity if that inforamtion is compromised. Controlling the ability for this information to be compromised has proven difficult, due to Paypal's integration with a multitude of websites which may or may not have the same security validations that Paypal's internal site boasts. Consumers have very little motivation, since the process is not any more simple than swiping their credit card. Paypal accounts need to be funded, similar to a debit card requiring money in a bank account. In a recent trip to Home Depot, the cashier advised me that he had not seen a single person paying in this manner. He blamed not only a complicated process, but a lack of consumer interest for the lack of the programs use in that peticular store.

Whether or not Paypal will continue to grow it's retail market share has yet to be seen, but one thing is for sure: The need for an alternative form of payment has been a long time coming...
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Daniel Kane

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  1. Read about it and weep, John Donahoe ...

    In addition to Visa’s V.me, there is now MasterCard’s PayPass digital wallet soon to arrive; another perfectly logical extension to the real banks’ traditional, professional, payment processing systems (and you don’t have to ditch the plastic) …

    Goodbye clunky PreyPal, I can’t say that it has been nice knowing you …

    “When Do We Start Calling eBay A [Failed] Payments Company?”


    And, just for a laugh then, some comment on PayPal’s off-eBay products: "The New Way To Pay In-Store" (at Home Depot), PayPal Here, SmartPay, PayPal Digital Wallet, PayPal Debit MasterCard, PayPal Local and Watch With eBay ...


    eBay / PayPal / Donahoe: Dead Men Walking