Interview - Cameron McLean, general manager of Merchant Services at PayPal UK
The headlines were pretty bold - by 2016 UK shoppers will not need a wallet when they go shopping on the high street, instead they will be able to use their mobile phones. By Glynn Davis
This was the result of recent research from Forrester that had been commissioned by eBay-owned PayPal
The online marketplace has certainly been finding the mobile channel fertile ground for sales as it recently increased its revenue over mobile forecasts for 2011 by 25% to a healthy $5 billion. The company is also the owner of PayPal so this will be good news for the online payments firm.
Supported by such statistics Cameron McLean, general manager of Merchant Services at PayPal UK, suggests: “The other huge change will be the sheer range of connected devices – some predict 50 billion worldwide by 2020. PayPal’s view is that consumers will want to be able to use a digital wallet to pay on any of their connected devices.”
Who powers these digital wallets and who has ownership of the consumers’ transaction data is a big issue. And it is currently being fought over very aggressively by many interested parties. Despite the existing banking players and payment card schemes hoping to retain their current power McLean believes there will be some changes on the cards when the fight is over.
“As new technology, new players, and new multi-channel scenarios are developed there will be changes to the ecosystem and with it some redistribution of the payments pie. There are always opportunities for smart companies that see a gap in the market. But payments are hard to do. And getting consumers and retailers to adopt a new payment method isn’t easy – the newcomer will have to offer something significantly better than existing ways to pay. PayPal did just that over a decade ago and continues to pioneer the future of money,” he explains.
His belief, rather sensibly, is that people will only adopt new ways to pay if they’re better than the existing ones. Ultimately this means it is not about technology, but more about a firm focus on the needs and demands of customers and merchants. McLean believes winning the battle for a slice of this payments pie will also involve “the ability [of providers] to innovate to meet customers’ changing needs, taking advantage of mobile technology”.
Although he firmly believes the mobile channel offers a lot of advantages and that it will secure its place as a hugely popular way to pay in the future, he acknowledges there are many challenges ahead before we see mainstream adoption in the UK.
“The main challenges are distributing the necessary software and services to both retailers and consumers, and creating a compelling and seamless customer experience. Anyone who remembers the false dawn of WAP a decade ago will recognise this is the key, not pushing out the latest technology,” he suggests.
Although not another potential false dawn as such, McLean has reservations about Near Field Communications (NFC): “NFC is an interesting piece of technology, but it is some years away from mass adoption. PayPal’s aim is to enable people to pay anytime, anywhere and on any device – including NFC-enabled ones. Again, it’s not about the technology – it’s about the customer experience, and making it easy for people to adopt new ways to pay.”
Whether it is around NFC or other solutions McLean recognises the need for experimentation and that ultimately some players and technologies will fail. “There will be a lot of experimentation, some successes and some failures – but ultimately customers and merchants will decide who wins. The next couple of years will be very exciting,” he suggests.
As for retailers, McLean again points to the need to focus on the customer: “The golden rule is to think about things from your customers’ viewpoint. And look ahead to future opportunities: the shopping experience will change a lot in the next few years as mobile and social shopping take off. PayPal is working with retailers to help them make the most of mobile.”
One way they can make the most of mobile is by using them to send offers and promotions to customers. McLean disagrees with the research from The Logic Group that found only 21% of people are willing to accept offers via their mobile phones
He instead points to recent data from ComScore that suggests offers are second only to ‘on-the-go’ convenience as a reason for buying by mobile. “The more people get used to it, the more they’ll see the advantages of having offers on their mobile, rather than coupons that we often leave at home when we go shopping.”
He adds: “Consumers will always love an offer, and the rise of mobile and hyper-local offers will open new opportunities, especially as digital wallets store offers so consumers don’t have to remember to take coupons with them.”
The adoption of such solutions, along with mobile payments, will also lead to a range of multi-channel opportunities such as ‘buy online and pick up in store’, which McLean says will further blur the line between the online world and the high street. In time he forecasts that it will completely disappear.
The roll-out of in-store Wi-Fi by various retailers including John Lewis and Tesco will help this blurring and help with the development of multi-channel retailing, according to McLean, who says its use will be most beneficial in locations with poor mobile reception. But again he suggests the key is to “make it a good experience” for the customers.
Poor mobile reception is a big issue for PayPal and its owner eBay as shown by its recent launch of a ‘UK Mobile Manifesto’ that highlighted the company’s view that “consumers are being held back from spending owing to frustrations with the speed at which they can complete everyday functions like browsing and shopping on their smartphones”.
As such McLean says: “eBay is calling for Ofcom to proceed as quickly as possible to enable the roll-out of next generation broadband in 2013.” Whether this brings about the changes the company is demanding remains to be seen but PayPal is certainly involving itself in cutting edge mobile payment activities.
One of the most interesting has been the development of an app for the UK-based PizzaExpress chain that enabled customers to pay for their meal via a mobile device using their PayPal account.
“The PizzaExpress app has created a huge buzz, and we’ll see plenty more examples over the next 12 months in the US and UK,” says McLean enthusiastically, although follow-up examples have been slow to appear when you bear in mind PizzaExpress launched its pioneering app in June 2011.
This may have been because some customers and industry commentators found the app rather clunky. But this is the nature of experimentation and PayPal will no doubt reap the benefits in the long-term of its efforts to raise the bar in the world of mobile payment solutions.