PayPal unveils ‘PayPal Here’ Square competitor for mobile payment
PayPal has more than just a digital wallet system for consumers planned. As rumored, today president and CEO John Donahoe has unveiled a small dongle that can be used to accept credit card payments to compete directly with Square, called “PayPal Here.”
Context & Ripple Effects
Two days after GigaOM's sourced report that PayPal was prepping a Square competitor, CEO John Donahoe made it official with PayPal Here: a card-reading dongle that turns a smartphone into a credit card terminal, which PayPal frames as 'the future of commerce' for the small businesses it says it has served for 14 years. The move extends a strategy already visible this month — a March 9 digital-wallet launch with personalized deals, plus a plan to push its large-retailer in-store payments platform down to smaller merchants.
The dongle wars are not new territory: Square pioneered the form factor, and VeriFone followed with its own iPhone card reader back in 2009. What changes is that a payments incumbent with PayPal's merchant relationships has now entered the category directly, building on the mobile-wallet groundwork signaled by its 2011 acquisition.
First-order effects
- Square loses its monopoly on the phone-dongle model overnight — it now competes against a rival with an established small-business customer base and full payment-processing stack behind it.
Second-order effects
- Intuit, Verifone and the other dongle makers named in the run-up reporting face pressure to match whatever pricing and features PayPal attaches to Here, since the incumbent can bundle it with existing merchant services.
Third-order effects
- If incumbents keep absorbing the dongle model, card readers become a commodity attachment and the real fight shifts to who owns the merchant relationship — software, fees and data — rather than the hardware itself.
The trend: Small-business point-of-sale is migrating from dedicated terminals to smartphones, drawing big internet payments platforms like PayPal into direct competition with startups that invented the category.