For most people, those are the three items a person simply can’t leave home without.
In a world of digital connectivity, however, the phone threatens to eliminate the first two. While most of us have seen replacements for keys — wireless fobs for cars, RFID chips for buildings — nothing has truly challenged that worn piece of leather in your pocket.
That’s changing quickly. Most of us have paid for a product digitally, either online or using a plastic credit card whose numbers are processed digitally. (Makes you wonder why we have them at all, doesn’t it?) But soon, your phone will be able to process that payment for you.
SmartPlanet spoke with PayPal’s Anuj Nayar about how his company seeks to hopes to stake a claim on this digital payment pipeline.
SP: Digital payments: where are we now?
AN: Everbody’s used it once or twice, but the scope and scale to pay for things in alternative ways has exploded. This is a great time for our company. The Internet is starting to finally revolutionize payments.
Payments is one [thing] that frankly hasn’t had any major innovations in a couple of decades. Credit cards in the ’50s. ATMs in the 1980s. ATMs revolutionized the way people used cash. But at the end of the day, it wasn’t that huge of a leap.
What’s happening now is the perfect storm of events: the ubiquity of the Internet, the ubiquity of devices that access it, and the increase in consumers who are living their life online.
SP: What’s next — and more importantly, who controls it?
AN: At the very base level of what PayPal is, we are, for all intents and purposes, a digital wallet that doesn’t necessarily have to live in any one device. It lives in that ubiquitous cloud.
You have a lot of different financial instruments in your wallet in the real world. Our vision is to move all that into the cloud, in the same way I carry a single wallet to pay a commercial institution like Starbucks and to pay my friend Jaime for lunch.
People say to us, “Oh, you’re just like credit cards.” We’re not. We are agnostic on the financial instrument. We’re not just a credit card. We’re receipts. We’re coupons. The ability to store that information in one place centrally — all that stuff should live somewhere.
SP: The idea is simple but achieving it is more complicated. What’s the low-hanging fruit?
AN: The first one is mobile. In 1998, we beamed money from one Palm Pilot to the other with infrared. In 2008, we suddenly experienced a massive jump to 25 million payments. In 2010, we closed out the year at 700 million. PayPal’s 2009 payment volume was $72 billion. It’s still a small percentage [of the overall transactions market].
People are starting to adopt the technology for a number of reasons. Everything that’s so cool about a smartphone you bought two years ago is just the norm now. I haven’t printed out Google Maps in two years. And back then, it was the coolest thing ever.
The phone is a change in the paradigm of computing. What PayPal does is online payments. Until a few years ago, that meant sitting in front of a computer. Now, you’ve got your mobile phone…is it online? Offline?
One thing I’m seeing lately is buying off your television. We recently announced a deal with Canoe Ventures, a consortium of all the biggest cable companies: Comcast, et cetera. They’re looking at success from QVC and the Home Shopping Network. People like to buy things on the TV.
With a lot of these smart systems, it becomes a pay-as-you-go model. A lot of the technology is starting to be that model. The one thing iTunes taught us is that people don’t mind paying $0.99 on a song when it’s easy. That’s PayPal — making it easy.
If your washing machine is connected, why don’t they give you the machine, and you pay as you wash? Or cars — already, cars are becoming connected. At the end of the day, they’re just a big mobile device. Why can’t you set it up so that when I drive to the gas station, you fill up, and we can process it?
If your wallet’s in the cloud, you can connect to any Internet-connected device, as long as you can connect it to an identity. For a car, it’s a VIN number. Parking meters — you can just pull into a spot. It’s the next step. Payments are a switching point that haven’t yet really been solved. At the end of the day, you still need to pay for these services. And if it’s difficult, people won’t do it.
SP: When am I going to be able to leave my wallet at home?
AN: A few of us [at PayPal] have tried it on the weekend. To be honest, offline is increasingly becoming online, but it’s happening in pockets. It’s not yet ubiquitous. For a taxi, or a bank, I won’t need to touch cash.
SP: How does PayPal get into those spaces? Most people who use PayPal have relationships directly with your company.
Partnerships. We actually already have a partnership with Discover. We will never white label the PayPal product, however.
SP: Are you the next Visa? You need ubiquity to make the cashless concept really work.
AN: There are all sorts of ways it could be used. That’s why we opened up the platforms to developers. There are massive numbers of companies that have started to take [PayPal] offline, like Bling Nation or iConcessionStand [now Yorder].
There are a bunch of activities we have to help them succeed; for one, we have a startup development fund. PayPal is about a third of eBay’s revenue right now — we have access to this great mothership of assets.
There is a massive amount of innovation going on in this field. Some will succeed; some will fail.
SP: There’s also digital goods.
AN: We’re adapting to digital goods. Of the $72 billion in payment volume in 2009, $2 billion was in digital goods.
Things are changing very rapidly.
Illustrations: iConcessionStand/Yorder; PayPal