'PayPal Here' To Take On Square, Allow Businesses To Payments Through Mobile Devices

By Alistair Barr

SAN FRANCISCO, March 15 (Reuters) - PayPal, the payments service owned by eBay Inc, unveiled a new device on Thursday that helps small businesses accept credit and debit cards through mobile devices, entering a fast-growing market now led by start-up Square Inc.

"PayPal Here" -- as the service is called -- will provide a free, triangle-shaped card reader and mobile application to small merchants.

That gadget, sometimes referred to as a dongle, plugs into the top of mobile devices like Apple Inc iPhones and, soon, Google Inc Android smart phones, allowing merchants to take payments through these gadgets on the go.

PayPal charges a fee of 2.7 percent of the purchase price for all types of credit and debit cards -- including those issued by American Express Co ; transaction fees for processing AmEx cards are often higher on other services. That compares with the 2.75 percent charged by Square.

PayPal is a dominant online payment processor, but the company is trying to expand into the physical world. It has a point of sale service that it hopes big retailers will use in thousands of stores. Now it is going after much smaller mechants with the new swipe device.

The volume of all types of mobile payments will top $200 billion by 2015, up from $16 billion in 2010, according to research and advisory firm Aite Group.

The market for mobile card acceptance by small businesses and individual merchants is probably about $4 billion currently, but it is growing fast, Rick Oglesby of Aite Group said.

Square, started in 2009 by Twitter founder Jack Dorsey, leads this niche of the mobile payments market, according to Oglesby.

Square is known for its own square-shaped card reader that attaches to the top of iPhones and other mobile devices. It has been a hit among small merchants, such as cab drivers.

The company is now processing more than $4 billion in payments a year and over 1 million people accept credit cards through its dongle. Visa Inc bought a stake in Square last year.

Intuit Inc, known for its accounting software, launched a mobile payment service for small businesses called GoPayment in May 2009 and unveiled a free version in early 2011 that came with a free card reading device.

GoPayment is about half the size of Square, Oglesby estimated.

"About 1.5 million small merchants are using these dongles now," he said.

PayPal has a good chance of grabbing some of the millions of small merchants who still do not accept credit and debit cards, Oglesby added.

"It's a big market and it's growing very rapidly," he said. "Most providers think there are 17 to 20 million small businesses in the U.S. that are not accepting cards."

Comments

[PhilipCohen]

06:20 PM on 03/23/2012

PayPal needs our help. Please don’t forget to vote!

The Consumerist is currently running it’s annual poll to find the “Worst Company in America”. The polling is spread over 13 March to 2 April and the winner will be announced on 4 April.

http://consumerist.com/2012/03/worst-company-2012-bracket-announcement.html

The first round of contest between PayPal and Capital One is now closed. Regrettably, PayPal won convincingly with 73% of the vote.

The second round of voting for PayPal (vs Charter Communications) is now open. PayPal is currently in front with 77% of the vote.

So, all you people who care about PayPal, please do your bit to save our beloved PayPal from this most ignominious award by voting for Charter to win this round.

[PhilipCohen]

05:54 PM on 03/23/2012

And, just for a laugh, some analysis of "PayPal: The New Way To Pay In-Store", PayPal Digital Wallet, PayPal Debit MasterCard, PayPal Here, PayPal Local and Watch With eBay ...

http://forums.auctionbytes.com/vbulletin/showthread.php?t=24611

eBay / PayPal / Donahoe: Dead Men Walking

[delphitefnut]

09:27 PM on 03/20/2012

Do NOT trust PAYPAL! They WILL FIND a way to HOLD YOUR FUNDS for at least 21 Days, up to 180. New York Times just did a story on Paypal/Ebay due to the overwhelming response to these holds and found out that they've been "Holding" the money in interest gaining accounts. Something very wrong going on at Paypal...stick w/ SQUARE.

[Jay Gould]

04:41 PM on 03/19/2012

PayPal Here is the first phone-based credit card acceptance platform that I like better than Square (https://squareup.com), provided it works as advertised, for two reasons. Firstly, PayPal Here makes the payment funds available immediately in the user's PayPal account. By contrast, Square does so upon completion of the transaction, which can take a couple of days. The second reason is that PayPal provides live phone-based customer support, which Square does not (and has received plenty of justified criticism for it). For a more detailed analysis: http://blog.unibulmerchantservices.com/paypal-here-vs-square-whats-the-difference.

[johnnygoodwud]

09:30 AM on 03/16/2012

i have been using 'square' for about a yr. never had a problem yet. sometimes my reception on my 3G phone is not great, so i have to handpunch the transaction. if you think you have a shady customer, make sure they sign, and take a picture of them holding the merchandise. for the extra 1/2%, which is .50 per $100.00, i'll stay with square.

[Chauntecleer]

06:57 AM on 03/16/2012

What about iZettle?

http://www.huffingtonpost.com/billrobinson/izettle-square_b_1095589.html

[VoiceOfReality2012]

06:28 AM on 03/16/2012

You have NONE of the banking safeguards when dealing with paypal. The customer can stop payment (paypal deducts that amount from your account) anytime they want, even months later. Paypal will even debit the funds from your checking account and cause your checks to bounce.
EXAMPLE: I sold a decent sized gold item on ebay 2 years ago. It was close to $700. Upon receipt of the package, which he signed for, he filed a paypal claim, "the package was empty," he claimed. They immediately deducted my money from my account and started an "investigation." Well, I did too. I searched the net under his multiple buyer names and found out that he had a history of this scam and ebay knew, full well, about it. I provided the information to paypal and in less than a month was told that the case had been found in HIS favor and my money had been returned to him. Now HOW are they not an accessory to that crime?

[To Tall Jones]

08:48 AM on 03/16/2012

@VoiceOfReality2012...I have used PayPal for over 12 years. I've had maybe 3-4 problems over the 12 years. All but one transaction ended up in my favor but it was a minuscule amount. The thing with PP I don't like is a customer can put a hold on the money almost immediately after the transaction if the customer says they didn't receive their merchandise. Of course they didn't receive it, I hadn't shipped it yet! So I hold the merchandise until the customer settles the dispute. On domestic transactions, the customer has 45 days to file a dispute, after 45 days, they can't. With overseas transactions depending on the country, they have 90-180 days, that is because of the banking regulations in those countries which all CC companies have to follow in order to do business there. If selling high dollar items, I would be very weary about shipping anything overseas, I would also be weary about using PayPal too, although, I think most, if not all CC companies will generally rule in favor of the customer. Its the way it is because the CC companies promise the customer total satisfaction or your money back, which in the end translates to the merchant getting shafted! If selling high dollar items, you should insure the contents, just make sure you put the cost of the insurance into the price of whatever you're selling, then when PP takes your money go through the insurance and get your money back.

[Bill Willard]

08:48 PM on 03/15/2012

Check out Dwolla.com. Their service beats Paypal and Square significantly. Dwolla charges 25 cents per transaction, no matter how large or small; and the money is going through a real bank, not just being washed by Paypal's system.

[thtech]

05:54 PM on 03/15/2012

I hope this goes nowhere, Paypal is a scam company, it's the reason I don't use eBay anymore, and I used to get loads of great gently used tech through eBay, for awhile they were the sole "supplier" of my repair business. Eh, we'll see where this goes. I wonder where Verifone is in this market? They are the leader in digital payment equipment, very surprised I haven't heard of anything like this from them.

[editorjuno]

09:47 PM on 03/15/2012

How did PayPal scam you? Been using them since way before eBay gobbled them with no problems -- what should I watch out for?

[Hardy Blacklord]

04:57 AM on 03/16/2012

I had the same problem. Sold for about $800 on ebay, 2 weeks later my PayPal account was frozen for no obvious reason. Customer service told me account was frozen for "suspicious reasons", and my money would be blocked for 180 days.

End of story was I had to wait 180 days for my money.
Will never use PayPal as a seller again.

[VoiceOfReality2012]

06:34 AM on 03/16/2012

You should watch out for customers scams. Paypal almost always returns your money to your customer, when they file a claim. Ive had it happen several times with the largest amount noted a few comments above (close to $700). It can be anything from them saying they didnt receive the package (even if they signed for it) or even claiming that they received an empty package. I had one customer return where the buyer send a pair of underwear with "tire tracks" on them (he was supposed to be returning a collectable for a refund) and paypal returned my funds to him as soon as tracking showed that his unholy package had arrived.

[Rich Phitzwell]

05:06 PM on 03/15/2012

They say 2.7% vs 2.9% but this is different then the online transaction of 2.9% + 30c per transaction. Square is 3.4% +15c per transaction when manually typing the card in.

My question is what is the rest of the details from paypal? Typically you have to go to paypal and request the money sent to your bank after 3 days while square sends automatically at midnight at most the next business day. They also state amex will be charged 3.5% and rebated the difference 45 days later while square does not.

Just some questions regarding the terms that are not specified.

As for those that complain about paypal, dont know what to say, they have been pretty good for me on both sides of the transaction so have I with google checkout and square just depends on specific terms of each service...

[apathyman]

04:48 PM on 03/15/2012

Pay Pal is shady. don't let them get their paws on your money

[skip86]

04:05 PM on 03/15/2012

PayPal is about to lose my business. They say I've nearly hit an arbitrary spending limit and I now need to be verified. To become verified I have to either give them my savings account information or apply for their credit card. Because I use AMEX for my PayPal payments I've never missed a one.

They assure me my bank info is secure. And I have a bridge to sell you. And the last thing I need is another credit card. What I have is just fine thank you.

Anyone else run into this outrageous practice, and what did you do?

[MAH999]

08:15 PM on 03/15/2012

I use it fairly extensively. It allows me to do business all over the world. I don't buy anything with it, just use it to process payments from distant clients. These new technologies have allowed me to expand my business into areas that I wouldn't have been able to be in before. I didn't really have a need for processing credit cards and didn't really want to set myself up with them.

Quite a long time ago, I went through that verification process. It felt like a necessary evil, so I just did it. I used to work in computer security so I'm well aware that computers aren't really secure. I have a special credit card/bank account that I set aside for this which makes it easier to track and to limit any outgo if it were to be hacked. That card has a very low limit and I never make purchases with it. That's how I'm dealing with the "security". I recommend that people use a single card for all online purchases, and not to use that card for anything else. If anything is ever out of order, it shows up more easily than it would in a personal account. It's also clear to my bank when something is not in my pattern of use. I have one card for these incoming deposits related to my business, and another for online purchases, and then my regular cards. So far so good.

[Rich Phitzwell]

09:53 PM on 03/15/2012

I think paypal google checkout square and so forth are all great product when you lnpw the terms and how to use them. Heck i did the math for a few merchant services and at the end of the month most small businesses would be better off using the squares and paypals rather than the typical 1.x% per transaction merchant services out there. The fees really do pile on. The only thing that i wish they would do is develop a reader for a computer and not charge additional fees like paypal does. I skirt the issue by putting paypal and google checkout links on my sites but really they could takeover the market completly if they did this.