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Q&A: PayPal on the future of payments

Essential Retail speaks to Rob Harper, director of mobile commerce at PayPal UK.

How are consumer habits changing in the way they pay for goods?

Consumers buying habits are continually changing, but one thing is constant: people are always thinking about convenience, speed and security as key factors when paying for goods and services. This tech-savvy, convenience-focused consumer is shaping the retail landscape, based on his or her own preferences and behaviours.

In fact, whether it is the phone alarm waking you in the morning or that last minute Whatsapp to a friend before you go to bed, the smartphone is central to most people’s lives. Research we’ve carried out shows that nearly 60% of ‘millennials’ are browsing for new purchases on their smartphone every day*. In fact, 30% of Brits expect to use their smartphones to shop more often in the next 12 months, rising to 44% for 18 to 25-year olds.

At the same time, consumers are shopping across multiple devices, across multiple channels and they are looking for frictionless ways to pay when they get to the moment they want to complete a purchase. The evolution of payments has to keep pace with the evolution of shopping, and in many cases this means moving away from cash and focusing more on digital payments, in-store, on-line and mobile.  

What is the future looking like for retail payments?

Firstly, not only has the blurring of the lines happened between online and offline shopping but the lines are now blurring between search, shopping and payments. All payments, not just retail should be a frictionless experience. Payments should just happen.

This leads us to mobile payments - the fastest growing part of our business. The smartphone is becoming more and more central in our lives and yet we still see many businesses have not capitalised on this revolution. We hope to see more businesses grasp the mobile opportunity, and adopt the many innovations that are already available.

There is then the coming together of bricks-and-mortar shops with digital retail; there is an opportunity for a retailer to expand its inventory in-store by enabling online purchases at the point of sale. If a customer cannot find the size or colour of item they are looking for in-store, in many cases the sale need not be lost but an online purchase taken in-store instead with the offer of click and collect or delivery to a home address.

Through working with businesses in this way, we have seen a transformation at the physical point of sale. Businesses are abandoning the traditional, cumbersome till set-up, in favour of tablet computers and handheld card readers that let staff roam and make a sale on the spot. Our PayPal Here card reader and app has completely transformed some businesses: allowing those that used to rely on cash to start taking card payments; and allowing larger retailers to reduce customer queues in-store.

Another significant innovation that will become more mainstream is contextual commerce. This evolution of mobile shopping will reduce the consumer shopping journey even further. Businesses will be able to make a sale at the point of discovery – whether that is in an email, on a Pinterest page or in a messenger app – rather than needing consumers to click through to an online shop or switch between apps.

Rob Harper, PayPal UK
Rob Harper, PayPal UK

Do you think the government should get rid of coppers? Are we going cashless?

We are progressively becoming more cashless however, we believe that cash will probably have a role to pay for some time. As I said above, consumers are continuing to look at convenience, speed and security as key factors when paying for goods and services. In many cases, this means moving away from cash and focusing more on card payments, whether that be Chip & PIN transactions or contactless card or device payments.

A traditional use of cash that we are increasingly seeing move to digital is paying back friends and family. We’ve seen a definite increased in the use of our person to person payment product either on our website or through our app. We’ve also been focusing on taking some of the friction out of friends and family pooling money for gifts, holidays or celebrations with our new product PayPal Money Pools to take our some of the inconvenience that cash can bring when they are trying to do a whip round.

Will shoppers ever be able to take their mobile shopping instead of their wallet – what about all their loyalty cards?

We predicted that 2016 would be the year that people could start to leave the house without their wallet and use their phone instead. I think we were right. The progress in mobile shopping in the last five years has been considerable. Whether you are using smartphone payments or using payment through apps like filling up your car with petrol at Shell, Esso or BP.

The ultimate experience is where a single digital interaction with the retailer has the ability to combine offers, loyalty and payment all with a single interaction at the point of sale or through a mobile payment. From the consumer’s point of view, to make a digital payment using a phone, then have to pull loyalty cards out of my physical wallet and swipe or scan this negates the ease of what a digital wallet is trying to achieve. The major oil companies have done worked hard to overcome this, with convenience and seamless payment at the heart of their innovations, they have turned card based loyalty into digital loyalty. Another example is the Greggs mobile app that combines loyalty and payment, with the ability for manufacturers to push offers to consumers who can then save them to their wallet. We believe there is a role for merchant branded digital wallets in turning their physical schemes into digital ones. There is still work to be done in this area across the industry.

How is PSD2 impacting retailers?

PSD2 is designed to increase competition and innovation in payments. Amongst other things, it will encourage more collaboration between traditional financial services providers and alternative non-bank providers, including digital payment companies like PayPal.

With regard to how it is actually impacting retailers, some aspects of the new regulations are still being worked on so it is not yet possible to assess fully the opportunities that lie ahead. PayPal is engaged with regulators to help them strike the right balance between providing consumers with security and convenience.

(*All statistics, unless otherwise stated, are taken from research conducted by Censuswide on behalf of PayPal between 11.08.17 - 16.08.17. Censuswide surveyed 2018 consumers in the UK, aged 18+, and 2001 UK business owners with 50 or less employees. Censuswide abide by and employ members of the Market Research Society which is based on the ESOMAR principles.)

RBTE takes place at London’s Olympia, 2-3 May 2018. While visiting the show, take a moment to recharge your batteries (and your smartphone) at the Chill & Re-charge Lounge Powered by PayPal.

You can register to attend here