PayPal adds support for prepaid gift cards, thanks to patent-pending ‘pay anytime anywhere with any card’ system
PayPal today announced it has added support for prepaid gift cards, letting its users apply them to the purchase of products and services anywhere PayPal Checkout is available.
Context & Ripple Effects
PayPal's gift-card support landed on the eve of holiday shopping and drew unusually broad same-day pickup — VentureBeat, TechCrunch, The Verge, Engadget and Gizmodo all ran the story — a signal of how much attention the checkout business commanded in late 2013.
The move extends a year-plus of infrastructure work at the company: the 2012 acquisition of card-scanning startup card.io fed the 'any card' ambition behind the patent-pending system, while September reviews found the redesigned mobile wallet powerful but baffling — so this feature arrives on top of an interface already criticized for complexity.
First-order effects
- Consumers holding idle prepaid gift cards can now apply those balances at any merchant running PayPal Checkout, without waiting on each retailer's own redemption flow.
- Merchants get access to gift-card-funded spending with zero additional integration, since PayPal absorbs the card-processing work inside its existing button.
Second-order effects
- Closed-loop gift card programs lose some of their lock-in value as balances become spendable anywhere PayPal Checkout appears, pressuring issuers whose economics depend on unredeemed cards.
- Rival one-click wallets and express-checkout buttons face immediate pressure to match the funding-source flexibility or cede the 'works with whatever you have' pitch.
Third-order effects
- If the pattern holds, checkout competition shifts from which cards are accepted to which intermediary can translate any stored value into merchant-ready payment, concentrating leverage in whoever owns the button at the moment of purchase.
The trend: Online checkout is consolidating around card-agnostic intermediaries, moving the point of payment control from the card network to the payment button.