PayPal Inc. is jumping into the fast-growing casual peer-to-peer payments industry under its own name, with a new service called PayPal.Me.
The move is a recognition that the boom in e-commerce on mobile has trickled down and changed how users want to pay back friends, family or co-workers for everything from movie tickets, split cab fares, shared gifts or that sandwich from the food truck.
PayPal already owns a casual mobile payments business called Venmo, a separate PayPal-owned app that also lets users send peer-to-peer payments but has a few more bells and whistles than PayPal.Me. It has seen stellar growth since 2013 – in the second quarter of 2015 it processed payments of $1.6-billion (U.S.), a year-over-year increase of 247 per cent.
There are also Canadian equivalents such as the startup Payso and overseas examples like M-PESA, but it's still early days for a market that hit $5-billion a year in 2014 in the United States and according to Forrester Research may reach $17-billion by the end of 2019.
"Our primary mandate has been to make it easy to move money around the globe and back and forth, making it easier for users to access their money," says Kerry Reynolds, head of consumer marketing for PayPal Canada.
Ms. Reynolds says users will be able to send a link from PayPal.me via text, e-mail or whatever chat service they use to ask people to pay up. They payee can instantly agree to pay on a phone, tablet or desktop so long as they also have a PayPal account. Users can even sign up for a customized URL so a PayPal.me link could be personalized to "YourMom" or "TheOneWhoKnocks."
PayPal's market research argues that most of us are terrible at paying each other back for these small-dollar casual lending moments. The company did a survey of 4,000 people across Canada, Germany, Australia and the U.S. and found the Canadians said they are owed an average of $460, and that money disputes have cost about 30 per cent of them a friendship.
Whether or not the person who pays you back incurs a transaction fee depends on if they have their bank account hooked up to PayPal (free) or if they use a credit card (for a fee of 2.9 per cent, plus 30 cents per transaction). Existing digital e-transfers, like those offered by Interac through Canadian banks, charge fees to transmit money.
Boosting user growth for PayPal's other services is another clear aim of PayPal.me. The company has about 169 million users globally – roughly six million in Canada – with an active PayPal account, although "active" is defined by any customer who uses PayPal once a year. The service rolls out in 18 countries on Tuesday, including Canada.
The old PayPal was a dominant commerce platform of the desktop Internet, where once it let collectors, curators, casual buyers and sellers on sites such as eBay use credit or other means of digital payment to do business without cumbersome e-transfers or, shudder, mailed money orders or cheques.
PayPal spun off from eBay in July and has been shaking up its traditional payments processing business as the service has seen its use on mobile blast off from $750-million in 2010 to $46-billion in 2014. The company claims that in Canada, mobile use jumped 99 per cent between 2012 and 2014.
In the second quarter ended June 30, PayPal processed 1.1 billion transactions that added up to $66-billion in net payment volume.
A big part of the company's revenue is still in its merchant transactions (up 27 per cent in the second quarter), some of which are invisible to users (its Braintree business is the back end for payments processed on mobile apps AirBnB and Uber). EBay transactions still account for about 30 per cent of PayPal revenue, but that category shrank by 1 per cent in the second quarter.
PayPal.me could also be used in casual commerce like lawn or bake sales: a potential seller wouldn't even need to have something like a Square card reader if a potential customer wanted to use their phone and PayPal account to settle up.
But the larger opportunity is to become the basic unit of pay-with-your-phone in the mobile era. Apple has filed a patent for a system that would let you use Apple Pay to give your buddy the $50 you owe him for the fantasy football league, but PayPal is cross platform.
The race is on, and whoever finds the easiest digital replacement for cash in person-to-person transactions could be the winner.
Shane Dingman