Introducing PayPal Here: The Future of Commerce for Small Business
PayPal has a long history of helping small businesses. For 14 years we've provided the tools and services that have allowed millions of small businesses to grow by solving the complex and critical task of processing payments securely …
Context & Ripple Effects
The launch confirms what GigaOM's sourcing flagged two days ago: PayPal is taking its card-acceptance dongle straight at Square. It comes on the heels of the digital wallet announcement earlier this month, which already laid out plans to extend the company's large-retailer in-store payments platform down to small businesses — PayPal Here is the small-business half of that same strategy.
The pickup has been unusually broad for a hardware accessory: The Verge ran both a news piece and a hands-on with the reader, and Help Net Security, PC World, Gizmodo UK and others carried the story the same day, reflecting how contested the mobile-payments narrative had become by early 2012.
First-order effects
- Square now faces a direct competitor with PayPal's 14-year processing track record and existing base of millions of small-business merchants, turning what was a startup-led category into an incumbent fight.
- Small merchants gain a second major option for accepting cards via a phone dongle and app, with PayPal bundling it alongside its broader commerce positioning rather than selling a reader alone.
Second-order effects
- Other established players circling the space — Intuit and Verifone were named in the run-up reporting as would-be competitors — are pushed to sharpen their own small-business mobile offerings before PayPal's distribution advantage locks in.
- Reader-plus-app pricing and fee structures become the competitive battleground, pressuring per-transaction economics across the nascent dongle market.
Third-order effects
- If incumbent processors keep matching startup features while adding wallet, deals and in-store rails on top, point-of-sale hardware stops being the product and becomes an attachment to a full merchant platform.
- The online-offline boundary in merchant payments erodes toward consolidation around a few platforms that own both the transaction and the customer relationship — a shift regulators and card networks will eventually have to price in.
The trend: Online payment incumbents are pushing into physical point-of-sale through smartphone dongles, converting card readers into entry points for full merchant platforms.