As PayPal continues to reinvent itself, expect the mother-of-all disruptions: a global currency comprised of cash and data. Similar to how voice and data coexist over the same copper wire today, PayPal’s next move will commingle cash and data over a shared platform.
ADVERTISEMENT |
Instead of bits to sound bytes, however, PayPal hopes to seamlessly integrate customer and peer data (in the cloud, of course) and deliver customized business intelligence across multiple platforms to small business merchants all over the world—right when they need it most. There is one catch. Every merchant transaction, including credit cards, would have to involve PayPal.
Last July at a PayPal-sponsored “Battle Hackathon” event, which took place at AlleyNYC near Times Square, more than 100 local software developers worked through the night in small groups to create a new killer app of their choice for a chance to win the $100,000 grand prize. This event was one of 10 stops along PayPal’s world tour, which included Barcelona, Berlin, Moscow, Seattle, and Tel Aviv. Throughout the night, PayPal’s minions were on hand to help developers integrate a list of special-access application program interfaces (APIs) into their code. These APIs offer developers controlled access to PayPal’s databases. Aside from identifying worthy programmers for hire, PayPal uses these Hackathons for feedback on its growing library of APIs. While attending a Hackathon, I caught up with PayPal’s global director for its developer network, John Lunn.
A former marine biologist who compares the behavior of schools of fish to PayPal members, Lunn shared some eye-popping statistics from PayPal’s extensive databank:
• Sixty-five percent of items purchased in a retail store have been researched prior to purchase on the Internet.
• Forty-three percent of browsers at a retail store actually make a purchase.
• Thirty-seven percent of shoppers who price compare in the aisles using a smartphone app, complete their purchase online later.
• On average, shoppers that are age 15 will remain on a retailer’s web page for less than six seconds.
“You have to be where your customers frequent,” claims Lunn, who strongly believes that the future of the web is with mobile devices, especially since market near-term predictions for mobile payments are upward of $20 billion. Already a prominent player, PayPal expects to process $7 billion in mobile payments next year, which is 10 times more than its volume two years ago.
The increased payment activity has PayPal eyeing the customer-specific, behavioral/buying-preference intelligence that can be extracted from the transactional data. Rich in details, this harnessed data could become a game-changer for small retailers.
“Without data, you actually know nothing about the consumer,” Lunn explains. Conversely, with data, a merchant can address a customer’s wants and needs at a lower cost. Showing a customer what he will most likely purchase based on his personal profile and peer comparisons can make every aspect of running a business immensely easier and efficient. From marketing, sales, inventory control, retail space, and employees on the floor—every improvement that is based on better business intelligence derived from rigorous data analytics and self-teaching algorithms will have a lasting impact on the rest of the business as well as its corresponding supply chain.
A customer’s buying experience is important too…
“Buyers no longer want to wait in line,” Lunn notes. Why should they if technology can enable them to step up to the same check-out counter? Lunn used Jamba Juice as an example of how PayPal card holders can order their favorite drinks from a mobile device; face recognition is used at the store to verify their purchase. There’s no waiting around because drinks are prepped in time to be picked up. Watching a worker cut up vegetables and blend a customer’s health drink was once perceived as fresh and worth the wait. Not anymore. Consumers value their time as much as they do the products they buy.
With buyers who are far more knowledgeable of products than ever before, the only line of defense available to merchants is a deeper understanding of their customer’s buying habits. But knowing what a customer purchases in one store is not enough to make a difference. Merchants need access to richer and timely intelligence about their customers and their peers, not just what they bought recently from them, but elsewhere, too, with other merchants, online or off line, locally and globally. With access to these data, merchants could target their best customers and provide them with exceptional service, especially during the few minutes a customer spends at the check-out counter. For example, once a face is recognized or an account number is entered at the register, hundreds of data points could be commingled, correlated, then calculated instantly between PayPal and the merchant database to extract a customized product recommendation such as a special offer or a custom-printed coupon booklet. Each timely recommendation would help build a stronger bond with the store’s brand.
Integrating into a merchant database or customer relationship management system requires an army of developers. PayPal knows this fact and hopes that its easy-to-use APIs will encourage developers to include PayPal with their client’s transaction processing needs. PayPal’s inclusion would do away with the “clunky terminals and expensive equipment” many merchants use today to process credit card payments. However, to make PayPal’s ambitious business intelligence plan really work, every merchant on the planet would have to become a PayPal member.
Could PayPal become the global reserve for cash and data?
To appreciate PayPal’s shrewd and brilliant strategy, pick up a copy of the fascinating book, The PayPal Wars, by Eric M. Jackson (World Ahead Publishing, 2008). The author explains in compelling, narrative detail how the simple idea of helping world economies through job creation, prosperity, and world peace hinges upon merchants trading freely and seamlessly across borders. If merchants in the Congo, for example, could sell their goods as easily to a local buyer as they would to a buyer in New Zealand, their improved cash flow would help strengthen their local economies and their businesses to grow.
PayPal’s past success was predicated on the individual support of its very members. When eBay tried to replace PayPal with an in-house solution called BillPoints, PayPal’s members rebelled. After many other similar competitive encounters, members could indirectly claim a personal stake in PayPal’s ongoing success. Their formidable presence overwhelmed even their craftiest challengers. Time will tell if PayPal’s loyal customers will once again help them forge on with their ambitious quest to become the global reserve for cash and data.
Add new comment