Two Australian small businesses with early trials of PayPal’s new in-store mobile payments system said they see value in the service despite high transaction fees and low consumer awareness.
With the PayPal payment system, announced last week, customers can open the PayPal mobile app and check into the store they are visiting. The store can then see their customers PayPal profiles on their point-of-sale (POS) terminals and charge the customer’s PayPal account by tapping his or her picture.
Crayons is based in Lane Cove, NSW, and specialises in educational technology. The Little Mule is a hybrid coffee and bicycle shop in Melbourne.
The small businesses each have been using the PayPal payment system for one to two months. While few customers are using the system in either store so far, the service works as advertised, the stores’ managers said.
“It’s a very seamless experience for customers,” said Crayons managing director, Jonathan Ladmore.
However, Ladmore estimated that only “five or six” customers paid that way so far. “We have been promoting it to our own mailing list, but very few people know about it in the general public,” he said. Some have come in just to try out the system, he said.
“Lots of people have PayPal accounts,” but few so far are using the app to check in, McIntyre said. “I’ve had one or two people come up and they’ve asked by themselves” to try the PayPal system, he said. However, “the uptake’s pretty slow going at the moment”.
The customers who did try the payment method appeared “surprised how simple it was,” Ladmore said. Another customer who owns a nearby coffee shop was “quite interested” in testing out the service, he said.
Besides low consumer awareness, another barrier to greater adoption of the PayPal service could be the transaction fees. PayPal has said the fees are similar to or slightly more expensive than credit card transactions.
“It’s as expensive as an [American Express] transaction,” Ladmore said.
PayPal fees are “much higher” than an EFTPOS transaction, McIntyre said. “In the long run, [the fees] probably need a bit of tweaking.”
However, both businesses noted an easy set up process that required no new equipment. Crayons and Little Mule use cloud-based software by Vend, which has partnered with PayPal to implement the in-store system.
“The set up process was quite painless” for Crayons because it didn’t require new equipment or software, Ladmore said.
Having to set up new equipment doesn’t appeal to McIntyre, he said. “I’m a big fan of not having to clutter up anything. I don’t really want to have anything near the register or have an extra step for someone to do.”
McIntyre said the only “time-consuming part” with PayPal was getting through the security process to verify the business’ account. “They restrict your account straight away and it takes a bit to get that unrestricted.”
The store managers cited added value in PayPal they don’t get from existing forms of payment. For example, when users check in, the store gets access to the customer’s PayPal profile, including a picture, email address and list of recent transactions at the store.
“Most people when they buy something don’t offer up who they are and their email address,” Ladmore said. The PayPal system “sets us up to provide better loyalty programs in the future to the customer base.” For example, Crayons wants to set up a program in which a school can be rewarded for purchases by its students’ parents, he said.
McIntyre agreed the customer information was handy, adding that the store can gather information on anyone who checks in, not just the customers who make purchases. That enhances the value of the service because it helps store build contact databases for future marketing, he said.
Ladmore said the popularity of PayPal for online payments was another factor.
“Most people have PayPal accounts, so to be able to utilise that balance in a bricks-and-mortar store was certainly something we were interested in,” he said. “I think it becomes a competitive advantage to offer different forms of payment.”
Both store managers said they are interesting in adding other new methods of digital payment.
Crayons “would love to,” Ladmore said. Google Wallet “is high on the priority list, and certainly if Apple did something ... we’d look at that as well,” he said. Crayons doesn’t currently have the equipment to take mobile payments by near field communications (NFC), “but that would be easy to set up,” he said.
The Little Mule has experienced “a big rush of people coming in” selling NFC and other payment technologies, McIntyre said. However, he said he’d most like a visit from Square, a US payments company that has yet to enter the Australian market.
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