PayPal coming to bricks and mortar retail via Toronto payments processor

A Toronto-area Point of Sales (POS) provider is partnering with PayPal Inc. to be the first to allow merchants to accept PayPal payments at bricks and mortar locations on a wide-scale basis.

AJB Software Design Inc. will roll out an update to its application programming interface (API) to include PayPal as an option to complete a transaction right alongside the likes of MasterCard and Visa. Consumers will be able to authenticate their PayPal accounts by swiping a new card from the eBay company, or entering in their linked mobile phone number and PIN on the POS key pad this Spring.

It’s the first payment eco-system partnership PayPal has made to promote the offline use of its mobile wallet, says Pat Polillo, vice-president of sales at the Mississauga, Ont.-based AJB Software. The 100-employee firm pursued working with PayPal after receiving several requests from its large retail customers.

“PayPal already has an immense number of subscribers, so they actually bring consumers to the table,” he says. “They already have the backend to handle transactions.”

Other players are developing mobile payment technology using smartphones. Google’s Wallet relies on an embedded near-field communications (NFC) chip to complete payments at checkout, but PayPal’s mobile wallet doesn’t require any new technology at the cash – just for the customer to be registered for an account.

“Everybody thinks the phone will replace the wallet,” says Anuj Nayar, director of communications at PayPal. “Your digital wallet should live in the cloud and accessed from many points.”

AJB Software’s API, Retail Transaction Switch, allows for network-delivered updates to include new payment processors. So PayPal can be rolled out to its retail customers entire infrastructure quickly, Nayar says.

AJB Software caters to 140 large retailers, including 25 of North America’s top 100 companies based on 2006 sales volume. It supports more than 250,000 POS terminals. While the PayPal integration will be rolled out for those with 300 store locations or more at first, it could be set up in smaller chains of 20 to 50 stores after some infrastructure problems are solved, Polillo says.

PayPal should be popular with merchants because it has a large user base in the U.S. and other markets, and it undercuts the transaction fees of credit card companies, says Bart Narter, senior vice-president of banking at Celent Inc. PayPal can move transactions through automatic clearing house transactions, or directly accessing a person’s bank account, which only costs pennies per instance.

“I think PayPal has a reasonable chance, and I don’t say that about many people,” he says.

PayPal isn’t disclosing how much its transaction fee will be at this point, Nayar says.

PayPal has been gearing up for its mobile wallet service by acquiring companies that would add additional consumer-friendly features. eBay recently bought barcode-scanning app Redlaser and shopping search engine Milo.

PayPal’s wallet will also be able to store loyalty rewards programs and coupons for consumers, which could be automatically applied to transactions. Consumers will also be able to keep a digital receipts list of their purchases, and even opt to change their payment method for a purchase after they get home from the store.

Merchants could also benefit from future features of PayPal that could track consumer’s in-store buying habits, Nayar says. It could be possible to know when a particular consumer is in the store and push deals to their smartphones.

PayPal will continue to push out to other POS systems and find ways to work with small retailers, Nayar adds.

“We anticipate we’ll be making further announcement with other eco-system providers in coming months,” he says.

The first AFB Software customer to accept PayPal payments will go live in the U.S. May 1, Polillo says.  

Brian JacksonBrian Jackson is the Associate Editor at ITBusiness.ca. Follow him on Twitter, read his blog, and check out the IT Business Facebook Page.

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