PayPal Test Program Will Let Home Depot Shoppers Pay at Checkout

January 07, 2012, 12:23 AM EST By Danielle Kucera

Jan. 7 (Bloomberg) -- EBay Inc.’s PayPal division plans to announce a partnership with Home Depot Inc. that lets shoppers use the payment system at checkout, taking aim at Visa Inc. and MasterCard Inc.’s credit card-swiping customers.

The agreement marks the company’s first retail partnership that allows payment on in-store terminals, said Anuj Nayar, a spokesman for the PayPal. Until now, the company has focused on e-commerce transactions.

PayPal, one of the fastest-growing parts of EBay, is trying to maintain its expansion by challenging traditional payment systems. The company is developing a so-called mobile wallet, which could be stored on a consumer’s smartphone or a special PayPal card, letting shoppers pay for items at checkout. The Home Depot project will roll out to consumers later this year, serving as a test project.

“Home Depot has a significant reach,” said Brian Blair, an analyst at Wedge Partners Corp. in New York. “PayPal has been historically in online payments. Now it becomes real-world currency.”

A small number of PayPal employees are already testing the Home Depot payment system at five stores, Nayar said.

The idea of the mobile wallet is to store credit- and debit-card information from a range of providers, with PayPal controlling the experience. The company plans to give customers the option to choose which provider they want to use up to 30 days after the sale.

Management Change

As it pushes into new markets, PayPal also is seeking a new leader. Former President Scott Thompson announced this week that he’ll become chief executive officer at Yahoo! Inc., the struggling Web portal. Under his management, PayPal more than doubled revenue and boosted its user base to more than 100 million.

PayPal first gained popularity as a way for smaller merchants to accept payment without the expense or hassle of processing credit cards. It has since enlisted major retailers, including Target Corp. and J. Crew Group Inc., which use it for e-commerce orders.

“Any additional place and meaningful retailer that you can use PayPal is a really, really good thing for PayPal,” Wedge Partners’ Blair said.

Shoppers on EBay’s marketplace frequently use the payment service, and an expansion into real-world retail would give them a chance to use their accounts more broadly, he said.

“Just EBay’s global users alone would like an extra place to use their dollars,” Blair said. “What will be interesting to see is if non-EBay users think PayPal works for them.”

Shares of EBay, based in San Jose, California, were little changed in yesterday’s trading at $30.63. The stock gained 9 percent last year.

--Editors: Nick Turner, John Lear

To contact the reporter on this story: Danielle Kucera in San Francisco at dkucera6@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net

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