Person-to-Person Payments and the Rise of PayPal
It’s no secret that advanced cell phone technologies have begun penetrating our everyday lives. Consider that in the third quarter of 2010 alone, 81.1 million Android handsets were sold and 13.5 million iPhones were sold according to International Data Corporation (IDC). Moreover, according to FierceMarkets, U.S. cell phone penetration reached 101% at the end of the third quarter, with almost 50% of all mobile device sales in smart phones (if you remove the demographics of those 5 years and younger).
This year, a new “bump” technology was introduced for iPhone and Android handsets that effectively allows two people to share information simply by bumping phones—including information which allows transfer of money between PayPal accounts. If you have a few minutes, watch this clip to see how easy it is: http://www.youtube.com/watch?v=X9RNJ2yywuk
What we find even more interesting about this payment model is the potential to expand beyond its current scope. At a recent developers’ conference in San Francisco, PayPal unveiled enhancements to its payment systems, including applications merchants can embed on their websites and PayPal Business Payments (any size, non-credit card payment for only $0.50 per transaction). In addition, USAA and Discover have already partnered with PayPal to offer P2P payments. And all of this is happening at a time when, as the sluggish economy perseveres and small businesses continues to struggle, some merchants are cutting expenses by refusing credit cards or charging fees for their use.
What does this mean for your credit union? As PayPal becomes a more primary means to pay for goods and services, will it have any effect on the way you serve your members? Will younger generations be socialized to expect this type of capability? How might interchange income be impacted?
