Mobile Payments Update – (2)

So, here’s a new equation to consider …….(PayPal)2 =  ∆

Did you get it? PayPal square equals triangle? Or PayPal’s ‘Square’ equals a ‘Triangle’?

As, I had mentioned in my previous post, PayPal was expected to launch a new product that would combat Square and Intuit’s GoPayments. Last week PayPal unveiled the “Here”, a card reader that fits a phones audio jack – just like Square. But unlike the Square, it’s shaped as a Triangle. So, PayPal’s ‘Square’ is a ‘Triangle’!

No matter the pun, PayPal’s entry into this market does change the equation and could potentially dent Square’s position. It turns out that Square in a very short time has managed to facilitate $4B worth of transactions. That’s a cool $110 million in fees. Now who wouldn’t want that?

PayPal has more than 100 million customers, although the company does not say how many of them are active. It is a global company and is a major player in the payments industry. So, its reputation (good or bad) does precede it and it will certainly be a worthy challenger to Square. And this is a battle that will be worth watching.

As opposed to Square, PayPal has a global reach and with this announcement, it will open up the doors worldwide. In terms of fees, ‘Here’ 2.7% is comparable to Square’s 2.75%. Additionally, Here will accept any credit card and at the same time users will have access to the PayPal debit card that will allow them to reduce fees by a point to 1.7%. Quite a deal!

That said, there is yet another player in this dongle game, a company called ROAM Data. ROAM also has a dongle based swiper called ROAMpay, that one can use on an Apple, Android or BlackBerry phone. While it does look like the Square, ROAMPay operates differently as it requires users to have a Merchant account. Meaning, your friendly handyman would not be able to use this. What it essentially does is to extend the POS to a mobile phone for the merchant.

In a future post, I will try to break down the payments market to try and depict the TAM, these folks are after. As I have mentioned before, the biggest draw of this market is the incremental business it will bring. For a pure play like Square, this is the business. But for folks like PayPal, the carriers, or payment networks, this is incremental business that will add yet another revenue stream at a very affordable cost.

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