Who will win? Doesn't matter--small businesses stand to gain as these mobile payment platforms try to out-innovate each other.
PayPal
PayPal has come out with guns blazing this week, announcing a new thumb-sized triangular credit card reader called PayPal Here that will let small businesses accept various forms of payment via iOS and (soon) Android devices. Sound familiar? It should—Square has offered similar—albeit square-shaped—technology for a while.
Now that PayPal is taking Square on head-to-head things are going to get interesting, but which company will come out ahead is a good question. A few things to consider:
Square Is Well-Loved by Users
Square has been a darling of the start-up ecosystem since launching in 2009 because it lets anyone take a credit card payment from anyone else—all with a small card reader that plugs into an iOS or Android mobile device. It's so slick that even President Obama's re-election campaign has said it will use Square to process credit card donations.
There's no doubt Square has been disruptive. The company, co-founded by Twitter's Jack Dorsey and backed by billionaire Richard Branson, has been valued at $1 billion and is processing $11 million in payments per day via more than a million merchants using its platform. It also has scored retail agreements with Apple, Walmart, Best Buy, Radio Shack, and Target.
Even so, ask around and there are going to be plenty of small business owners who still don't know about Square.
Brand Recognition, for Better and Worse
And that's where PayPal may make serious headway—with its powerful brand recognition and 100 million users worldwide.
For years consumers have trusted PayPal to be the financial go-between online—in instances where you don't want to hand over your credit card to a party you may not be able to trust. And if some part of the sale goes bad—say your Ebay purchase never shows up–PayPal gets involved and will refund your money.
But it's that intermediary role that also has given PayPal a bad rap from some users who say that the company goes too far in protecting buyers, sometimes wrongly freezing seller accounts based on these disputes.
But for the vast majority of people who have used PayPal without incident, the new mobile payment solution will likely be a welcome one.
The blue PayPal Here reader and its accompanying app look impressive. Not only can you swipe credit cards using the thumb-sized reader and mobile app, you can also use your device's camera to scan cards and paper checks as well as pay for things using your PayPal account.
And PayPal is undercutting Square's 2.75% transaction fee by just a titch, setting its flat rate at 2.7% for card swipes and PayPal payments. PayPal Here users also get a business debit card with 1% cash back.
Who Will Prevail?
Hands-down domination in this space isn't likely to be something we're going to see soon. For one thing, it's a humongous market and many big players are investing heavily in digital wallet platforms.
In addition to its new payment device PayPal this week announced that its digital wallet will be released in May. With it, you'll be able pick a credit or debit card to use for a transaction or set up rules that designate which account should be used to pay for purchases involving various dollar amounts. PayPal's wallet also will let you create virtual accounts in which funds can automatically be deposited to save up for things like vacations or holiday shopping funds.
Square and PayPal aren't the only ones to watch.
The Isis digital wallet platform is ramping up to be a major contender. Earlier this month VeriFone, Ingenico, ViVOtech and Equinox Payments announced they would be integrating Isis into their products. Other big names backing Isis include mobile carriers AT&T, T-Mobile, Verizon, Visa, MasterCard, Discover, and American Express.
And then, of course, there's Google Wallet to consider.
Google recently announced Sprint would introduce at least 10 additional phones with Google Wallet on board. Already about two dozen of the largest U.S. retail chains now let people buy things using Google Wallet by tapping their phones onto MasterCard PayPass terminals.
Wallet is a big deal for Google. According to the Silicon Valley's Mercury News, Google has been strong-arming developers to use Google Wallet and has warned some of them that if they continue to use other payment methods such as PayPal that their apps would be removed from Google Play (its version of an apps store).
Regardless of which platform comes out on top, one thing is certain: Consumers and business owners stand to be the real winners as all these powerful players seek to out-innovate each other.
