Could PayPal become the Global Reserve for Cash and Data?

As PayPal continues to reinvent itself, expect the mother of all disruptions, a global currency comprised of cash and data. Similar to how voice and data coexist over the same copper wire today, PayPal’s next move will co-mingle cash and data over a shared platform. Instead of bits to sound bytes, however, PayPal hopes to seamlessly integrate customer and peer data (in the cloud, of course) and deliver customized business intelligence across multiple platforms to small business merchants all over the world — right when they need it most. There is one catch. Every merchant transaction including credit cards would have to involve PayPal.

Last July at a PayPal sponsored ‘Battle Hackathon’ event, which took place at AlleyNYC (alleynyc.com) near Times Square, over 100 local software developers worked through the night in small groups to create a new ‘killer app’ of their choice for a chance to win a $100,000 grand prize. This event was one of ten stops along PayPal’s world tour, which included Barcelona, Berlin, Moscow, Seattle, and Tel Aviv. Throughout the night, PayPal’s minions were on-hand to help developers integrate a list of special access APIs (Application Programming Interface) into their code. These APIs offer developers controlled access to PayPal’s databases. Aside from identifying worthy programmers for hire, PayPal uses these Hackathons for feedback on their growing library of APIs. While attending, I caught up with their Global Director for their developer network, John Lunn.

A former marine biologist who compares PayPal’s membership behavior to schools of fish, Lunn shared some eye-popping statistics from PayPal’s extensive databank.

  • 65% of items purchased in a retail store have been researched prior on the Internet.
  • 43% of browsers at a retail store actually make a purchase.
  • 37% of shoppers who price compare in the aisles using a smartphone App, complete their purchase online later,
  • On average 15 year-olds will remain on a retailer’s web page for less than 6 seconds.

“You have to be where your customers frequent”, claimed Lunn who strongly believes that the future of the web is with mobile devices, especially since market near-term predictions for mobile payments are upwards of $20b. Already a prominent player, PayPal expects to process $7 billion in mobile payments next year, which is 10 times more than its volume two years ago.

The increased payment activity has PayPal eyeing the customer-specific,  behavioral/buying-preference intel that can be extracted from the transactional data. Rich in details, this harnessed data could become a game-changer for small retailers.

“Without data, you actually know nothing about the consumer,” Lunn exclaimed. Conversely, with data, a merchant can react or address a customer’s wants and needs at a lower cost. Showing a customer what they will most likely purchase based on their personal profile and peer comparisons can make every aspect of running a business immensely easier and efficient. From marketing, sales, inventory control, retail space, and employees on the floor — every improvement that is based off better business intelligence derived from rigorous data analytics and self-teaching algorithms will have a lasting impact on the rest of the business as well as for its corresponding supply chain.

A customer’s buying experience is important too…  

“Buyers no longer want to wait in line,” Lunn notes. …and why should they if technology can enable them to simultaneously step up to the same checkout counter. Lunn used Jambo Juice as an example of how PayPal card holders can order up their favorite drinks from their mobile device and use face recognition to verify their purchase in the store. There’s no waiting around since drinks are prepped in time to be picked up. Watching a worker cut up vegetables and blend a customer’s health drink was once perceived as fresh and worth the wait. Not anymore. Consumers value their time as much as they do the products they buy.

With buyers who are far more knowledgeable of products than ever before, the only line of defense available to merchants is a deeper understanding of their customer’s buying habits. But knowing what a customer purchases in one store is not enough to make a difference. Merchants need access to richer and timely intel about their customers and their peers, not just what they bought recently from them, but elsewhere too, with other merchants, on or offline, locally and globally.  With access to this much data, merchants could target their best customers and provide them with exceptional service especially during the few minutes a customer spends at the check-out counter. For example, once a face is recognized at the register or an account number entered, hundreds of points of data could be co-mingled, correlated, then calculated instantly between PayPal and the merchants database to extract a customized product recommendation such as a special offer or custom-printed coupon booklet. Each timely recommendation would help build a stronger bond with the store’s brand.

Integrating into a merchants database or CRM system requires an army of developers. PayPal knows this fact and hopes that its easy-to-use APIs will encourage developers to include PayPal with their client’s transaction processing needs. PayPal’s inclusion would do away with the ‘clunky terminals and expensive equipment’ many merchants use today to process credit card payments. However, to make PayPal’s ambitious business intel plan really work, every merchant on the planet would have to become a PayPal member.

Could PayPal become the Global Reserve for cash and data?

To appreciate PayPal’s shrewd and brilliant strategy, pick up a copy of a fascinating book titled, “The PayPal Wars” by Eric M. Jackson. The author explains in compelling, narrative detail how the simple idea of helping world economies through job creation, prosperity, and world peace is hinged upon merchants trading freely and seamlessly across borders. If merchants in The Congo, for example, could sell their goods as easily to a local buyer as they would to a buyer in New Zealand, their improved cash flow would help strengthen their local economies and grow their businesses.

PayPal’s past success was predicated on the individual support of its very members. When eBay tried to replace them with an in-house solution called BillPoints, PayPal’s members rebelled. …and after many other similar competitive encounters, members could indirectly claim a personal stake in PayPal’s ongoing success. Their formidable presence overwhelmed even their craftiest challengers. Time will tell if PayPal’s loyal customers will once again help them forge on with their ambitious quest to become the Global Reserve for cash and data.

© 2013 Tom Kadala

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

%d bloggers like this: