Now PayPal Aims To Track You In Real Life

Since David Marcus took over as CEO of PayPal last year, the payments arm of eBay Inc. has been busily pumping out new products such as its revamped mobile app.

But as he pulls out a small device, hardly bigger than a flash-memory drive, from a cloth pouch, he grins: "This is the launch I'm most excited about."

What has Marcus so stoked?

Here's PayPal Beacon, a shopper detector for stores. Here's PayPal Beacon, a shopper detector for stores.

A Shopper Detector For Stores

It's PayPal Beacon, a night-light-sized piece of hardware that aims to detect when one of PayPal's 140 million users is near a store that takes PayPal. The primary goal is to make it easier for users to pay for real-world purchases using their PayPal app, since merchants will be primed for them at the register.

It's not a new concept in the mobile-commerce world. Square, a rival payments service, has a similar feature. And Shopkick, a rewards service that offers discounts and promotions, detects when its app users walk into a store using a device that emits high-frequency audio.

But Marcus believes that PayPal's approach, which takes advantage of the newest version of Bluetooth, a short-range wireless technology, is the only one that will scale to hundreds of thousands, if not millions, of locations. Which speaks to PayPal's designs on the market for real-world, in-store payments.

Existing smartphone location technologies drain users' batteries and are limited in the number of venues they can track, Marcus argues.

A Hardware Fix Waiting For Better Software?

PayPal Beacon is an elegant, even subtle piece of hardware, with a triangular shape that echoes PayPal Here, PayPal's credit-card swiper. (PayPal got lots of grief for mimicking Square's four-sided credit-card reader, minus one side, but it seems to be sticking with the visual metaphor.)

Using Bluetooth to confirm users' physical presence seems like a reasonably smart choice. The latest version of the technology is ubiquitous in new iPhones and Android models. (Users with older phones can always check in manually within PayPal's app to announce their presence.)

Whether users check in automatically or manually, their names and faces—if they've added a photo to their PayPal accounts—will show up on the merchants' point-of-sale system. PayPal has its own iPad software, and it has also integrated the feature that lets you pay by saying your name with other cash-register software.

But the cost seems like it could slow adoption of a technology that wants to be ubiquitous. PayPal has not yet announced Beacon's price; Marcus says it will be less than $100.

Apple and Google are trying hard to reduce the battery requirements of their platforms' location services. It is possible that Beacon could have a short life as users' locations becomes easier to pin down without special hardware.

Marcus argues that in dense retail locations, like malls and downtown shopping districts, standard location services won't deliver enough precision for some time.

Saving A Swipe

It seems like a lot of effort to save people a credit-card swipe or a manual check-in. Even Marcus admits: "I've never met anyone who says, 'Swiping my card is hard'."

Where things get interesting is the weaving together of location with coupons and loyalty programs. What if Beacon, for example, offered you a discount on a latte—not the first time you walked into a café, but the second time? That could solve a lot of complaints merchants have about online-to-offline marketing programs, which often drive discount-seeking newbies to a store, but do little to keep them coming back.

In going into stores with its mobile app, Beacon, and its suite of services for shopkeepers, PayPal will have to deal with lingering blowback over its original online-payments business. Customers are frustrated by occasions where they feel that PayPal hasn't done enough to investigate fraud; organizations accepting payments, particularly nontraditional ones like crowdfunding campaigns, are understandably quick to anger when PayPal freezes their account (in an effort to avert those same fraud complaints that enrage consumers).

A Beacon For PayPal's Brand?

Those incidents may be rare in PayPal's total stream of transactions, but they reverberate online. (Marcus responds to unhappy customers and critics on Twitter and even in the comments of news stories about the company, and PayPal says it has lowered the number of accounts it freezes on suspicion of fraud.) 

The best hope for PayPal is that its in-store efforts don't just help it expand its base of payments, but also rebuild its brand—standing for the ease of paying with your phone in your pocket or saving money without digging for a coupon. PayPal may not be the first to bring these innovations to market, but Marcus clearly believes it can bring them to the masses.