If you have been following PayPal over the past year or so, yesterday's acquisition of Braintree will not have come as a great surprise. PayPal is clearly on a roll - a cursory look at their activity in recent months includes the following...
- National launch of POS acceptance via Discover network
- Cash in / cash out remittance via partnership with Moneygram
- Development of BLE beacon service for check in and payment pre-POS.
- Launch of PayPal Capital, offering small business financing to compete with the likes of Kabbage and On Deck Capital, as well as high street banks and credit unions.
So, who is threatened by all this? Will PayPal cut out the middleman? Certainly issuing banks I've spoken with are gravely concerned about the prospect of being out-innovated by PayPal and other disruptors. I spoke with a dozen or so bank executives in recent weeks, asking them "what keeps them up at night"? ALL of them mentioned concerns about disintermediation within their top three answers. But, is this threat really likely?
There are traditional areas of payments that should rightly be concerned by PayPal's recent physical world inroads. With BillMeLater, PayPal could begin issuing real time credit at the POS and certainly the intention is for BillMeLater to be available everywhere that PayPal can be (issuing banks pay attention). Similarly, Braintree could be moved up the food chain to be a web 1.0 payment processor competing with the likes of FDC, Chase Paymentech and Cybersource.
But PayPal isn't infallible - the rollout of payments at Home Depot using PIN-AND-EVER-SO-CUMBERSOME-PHONE-NUMBER-MANUAL-ENTRY was hardly a winner - their current partnership / acquisition / innovation binge may result in similarly undesirable payment monstrosities.
As a further reality check, the Javelin 2013 Retail POS Forecast report highlights that while new technologies are clearly disrupting the shopping experience via activities such as 'showrooming', the actual transaction volume via these channels is so low as to be barely visible as a percentage of overall POS $volume. Yes, smartphones are in the hands of more than half of the US population, but what percentage of these people have more than a cursory interest in using them for anything beyond Instagramming their lunch? And finally, for all of the dynamism and bluster that PayPal (and the other harbingers of doom - Google, Facebook, Apple, Amazon) cause for the payments industry, they are ALL still reliant on existing payment rails and relationships to do what they do.Yes, there is disruption coming, but it isn't disintermediation. Not yet anyway... (Wake me up when PayPal acquires MT Gox).