Mobile Payment's Next Challenge: Kill the Checkout Line
Jan 17th 2013 1:52PM
Updated Jan 22nd 2013 5:25PM
eBay's PayPal service is breaking out of its online home.
Over the last year, the company pushed hard to bring PayPal into the physical retailing world. And it looks like that effort is paying off. Since launching with just a few Home Depot stores, PayPal is now accepted by 23 major retailers at over 18,000 locations. Foot Locker, American Eagle, and Dollar General are just a few of the companies that have recently signed on to accept PayPal.
Now that merchants are picking it up, the issue is how to get customers to adopt the new payment method. eBay has some interesting ideas about that. And one of the biggest is to take aim at a staple of the retail experience: the checkout line.
What a pal
There's no question that PayPal is a dominant force online. Active accounts grew by 15% last quarter, up to 123 million users. And total payment volume rose by a scorching 24%. PayPal is an early success story in the mobile payments market, too. eBay handled $14 billion of volume through mobile devices with the service for the year. And that's expected to surge to $20 billion in 2013.
But with PayPal's physical rollout, eBay needs to convince its millions of online users to start using their accounts offline. That will be a much harder sell.
Still, CEO John Donahoe thinks he has at least part of the answer: super-quick smoothies. eBay is testing an order-ahead mobile feature at a Jamba Juice location in California. Using that service, customers can order their drinks in advance and pay using their PayPal account. Then it's just a matter of walking into the store, blowing past the line, and picking up your order at the counter.
Pay in no time
The Jamba Juice trial is just taking the emerging mobile payments service one step further. Already, at thousands of Starbucks locations, customers can use their Square Wallet app to nix the card-swiping part of their purchase experience. That shaves a few pre-caffeinated seconds off the ordeal, speeding up that morning latte line.
And for busy retailers like Starbucks, those seconds quickly add up. At Chipotle Mexican Grill , where lunch hour is the big crush, transaction times are measured in fractions of a second. The burrito slinger's most efficient restaurants can handle 350 orders over lunch hour, moving one through the line every 11 seconds.
McDonald's handles even more volume, of course. So the company routinely experiments with new ways to try to cut milliseconds off its order-taking. Recently, Mickey D's tried sending staff members into the checkout line to take customers' orders while they wait. The order taker can speed up the process by booking orders from the line using a handheld device.
Feel my pain
But why have a line at all?
Donahoe calls the process of waiting in line a great example of a "pain point." In a conference call with analysts, he said that solving problems like these was the way that PayPal grew to its powerhouse status online. And it points the way forward for how the service can break into the physical retailing world.
That's the only way we're going to get healthy consumer adoption. The same way PayPal has solved pain points online, it was safer and easier. On mobile, it's safer and easier. In the offline world, we're looking for situations like standing in line. ...Consumers don't like it. Retailers don't like it.
Other situations ripe for mobile innovation that Donahoe called out included restaurant service. Diners shouldn't have to wait to pay their check and tip their server after the meal. Instead, PayPal would be there to cut out the process of passing your credit card back and forth. And it could nix the part where you wait for a server to process your payment.
It will be a while before we know if PayPal gains any traction in the offline world. But until usage figures come out, investors can keep an eye on the number of retailers choosing to adopt the service as a payment option. With a growing base of locations and plenty of ideas for innovative changes to the retail experience, the leap to actual usage should just be a matter of trial and error. Attacking the hassle of the checkout line is a fine place to start.
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The article Mobile Payment's Next Challenge: Kill the Checkout Line originally appeared on Fool.com.Fool contributor Demitrios Kalogeropoulos owns shares of McDonald's. The Motley Fool recommends Chipotle Mexican Grill, eBay, Home Depot, McDonald's, and Starbucks. The Motley Fool owns shares of Chipotle Mexican Grill, eBay, McDonald's, and Starbucks. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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