PayPal recently announced that it will be unveiling a new Bluetooth device called the PayPal Beacon that will allow consumers to check in at stores without even touching their phones.

Merchants that enable the PayPal Beacon technology will let consumers pay completely hands-free as well as check-in to the store the moment they walk in. With the number of mobile commerce options growing by the day, PayPal Beacon offers a new alternative to the already struggling NFC-enabled technologies.

“The introduction of this beacon and the simplicity of its use and integration for the most part certainly indicates that NFC has no chance,” said Arkady Fridman, senior research analyst at Aite Group, LLC, Boston. “What it does, it certainly highlights that there are ways and technologies and even constructs that can enable these mobile payments to succeed without NFC.

“They’re highlighting the fact that this whole argument between cloud and NFC has been the wrong argument altogether,” he said. “I certainly think it’s a blow towards NFC proponents, and it’s a strong competitor.

“It is reducing friction in the shopping experience, and this is I think what mobile technology in general lets us do, it is helping merchants understand who is inside their store.”

Bluetooth technology
The PayPal Beacon essentially lets consumers walk into their favorite store and pay without doing anything. The store is alerted when the customer walks in the door, and when the customer is ready to checkout the transaction can go through without even having to take out a phone.

The device uses Bluetooth Low Energy that enables connected devices to communicate with each other at a low energy consumption level. This means that the process does not require GPS or even a phone signal.

Any stores that run PayPal point-of-sale systems can just plug a Beacon device in a power outlet in their store, and the new technology will be available.

Consumers will have to download the PayPal app to use the Beacon, but it means that they will not have to download individual apps for each store.

PayPal also plans on rolling out a mobile in-store API that enables features such as self-checkout on a mobile phone as well as the ability for merchants to place a customer’s usual order as soon as he walks through the door. The company is accepting submissions for ideas to innovate the in-store shopping experience.

While NFC has garnered a lot of discussion in the mobile commerce world, it has not really picked up in terms of consumer adoption.

“NFC was one of the early experiments, but it turns out that it’s no easier to tap a phone than swipe a card,” said Hill Ferguson, vice president of global product at PayPal, San Francisco. “We challenged ourselves to find a better experience than swiping a credit card.

“We figured the only better way to pay would be to do nothing,” he said. “Just walk in a store, and, like magic, when you’re ready to pay, money is transferred securely.”

Improved shopping experience
When it comes to mobile payments, the key is providing consumers with an option that is better than using a credit card. Swiping a credit card to pay is extremely easy, so a mobile alternative needs to go beyond the basics and provide a superior shopping experience.

PayPal realized this challenge and used the Beacon to enhance the consumer in-store experience. Since a merchant will know when a consumer walks into its store, it can identify consumer behavior and preferences to provide a more personalized experience.

According to Aite Group’s Mr. Fridman, the technology will be more beneficial to consumers if merchants use it to cater personalized offers and deals to individual shoppers.

Once PayPal rolls out its mobile in-store API it will further the customer experience enhancements of the Beacon.

“By allowing the payment experience to get out of the way, we can allow developers and retailers to build more personal and more valuable shopping experiences, all from the convenience from the PayPal app,” PayPal’s Mr. Ferguson said. “It could be an interactive map to see where sales items are located or a self-checkout experience at the grocery store. We’re excited to see the developer community’s innovation when it comes to PayPal Beacon.”

Additionally, the PayPal Beacon meets common concerns that have accompanied other technologies that involve GPS and geolocation.

Jeff Green, director of the emerging technologies advisory service at Mercator Advisory Group, Maynard, MA, points to one specific offering called The Gimbal. It uses radios in smartphones to help identify where the user is located.

“It has a creepiness factor to it too,” he said. “It kind of tells you just how much people know about you in any given time.

“What PayPal is apparently doing with Beacon is not including that traceability element in the technology. It is strictly a Bluetooth locator. It doesn’t use GPS or Wi-Fi to identify where you are, and that can take some of the creepiness out of the equation.”

The Beacon lets consumers decide which merchants can access their profiles, and there is less of the ‘Big Brother’ feeling associated with the device since the company promises that it is not traceable.

Additionally, geo-location requires phone signal and good data and it uses up a lot of battery life, so the Beacon avoids these challenges.

Possible setbacks
While the technology does seem promising, the PayPal Beacon does create a few challenges.

For one, the device requires advanced set-up, meaning that consumers will have to enter their information and their preferred stores ahead of time so that the technology works when they walk into the store.

There are also some security and fraud concerns.

The more removed a transaction gets from physical exchanges, the more risk there is for fraud. Merchants will need to figure out how to make sure shoppers do not simply walk out of a store with merchandise.

Mr. Green also points out that the device simply plugs into the wall and questions what will keep someone from unplugging or stealing the device.

Despite these setbacks, the PayPal Beacon does solve a lot of current challenges with mobile payments, and Mr. Green believes that the company is moving in the right direction.

“This whole concept of having to activate an app to use it in a store is going to get old very quickly especially when they’re competing against the simplicity of taking out a credit card and swiping it,” he said. “Until something becomes simpler than that, a lot of these mobile apps are going to struggle.

“PayPal is definitely in the right direction with beacon in trying to alleviate some of those issues, to make conducting mobile payments almost automatic when you walk into a store, without even having to have the phone in your hand at any time.”

Sam Maule, manager at Carlisle & Gallagher Consulting Group, Charlotte, NC, is not as sure that the PayPal Beacon is so revolutionary.
“This isn’t exactly new, LevelUp has something similar, and Square has a hands free feature with name/picture identification,” he said.

For Mr. Maule, the most exciting part about PayPal’s announcement is that the company is opening up API development opportunities and taking suggestions from the masses.

“I view PayPal as a leader in the mobile payment space right now,” he said. “I like what David Marcus is doing with the company and the continuous push to innovate.

“However, mobile payments is like the NFL – easy to be on top one season and then wondering why you’re in last place the next.”

Final Take
Rebecca Borison is editorial assistant on Mobile Commerce Daily, New York