Online payments giant, PayPal, is working on a new app for its mobile customers and suggests it is “ready” to take advantage of the European Union’s new regulation, the Digital Markets Act (DMA), when it goes into effect next month for technology “gatekeepers” like Apple. One of the significant changes the DMA will bring for PayPal concerns the ability for third-party apps to access the NFC technology that currently powers Apple Pay in their own mobile wallet apps. iPhone users will also be able to switch to another mobile wallet as their default, according to the new guidelines.
Impact on Apple relations
During the fourth quarter earnings conference call, PayPal did not share much about its plans regarding Apple’s compliance with DMA or how this will specifically affect PayPal. This is partly because Apple is a company that PayPal works closely with today, offering checkout and payment services on Apple devices from Macs to iPhones, as well as integrations with Apple Wallet, including support for contactless “Tap to Pay” payments that leverage Apple Wallet.
PayPal CEO Alex Chriss stressed that the company is following this closely and said, “Apple is a great partner of ours.” However, Chriss also suggested that PayPal customers are looking for a way to use PayPal outside of the online payment world and that the company is working to meet this need.
The opportunity for “offline” payments
“Offline” payments, i.e., those made in physical stores, is an area in which PayPal has unsuccessfully tried to expand in recent years. Over the past decade, PayPal has attempted a number of initiatives in this area, including partnerships with national retailers in the United States, agreements with software and point-of-sale terminal manufacturers, functionality to pay local stores via the app, acquisitions of mobile wallet technologies, the use of QR codes for retailer payments, partnerships with credit cards for offline payments, tools for merchants selling offline, and more.
However, although the COVID-19 pandemic has accelerated the adoption of contactless payments, Apple Pay has remained the major player in mobile payments, at least in the United States. As for the European Union, Europe has strong mobile wallet penetration, with one study from 2023 stating that the majority (72 percent) actively interact with this technology. Another analysis claims that the size of the European mobile payments market will reach $108.35 billion in 2024 and $373.29 billion by 2029. While Apple and Google have gained ground in this area, 90 percent of Europeans have used PayPal’s services, according to the study.
Simply put, PayPal has a considerable opportunity to take advantage of Apple’s more flexible rules in the coming days, if it so desires. Apple’s DMA-driven changes will include new APIs that will allow app developers to use NFC technology in their banking and mobile wallet apps throughout the European Union. In addition, Apple is adding new controls that will allow consumers to select a third-party contactless payment app as the new default. In other words, PayPal could replace Apple Pay if it adopts this feature.
PayPal’s future plans
PayPal CEO Chriss did not specify when PayPal will implement the “offline” solution that DMA will make possible, but said the company will be “ready” to do so sometime after the new feature becomes available. In this regard, PayPal also suggested that there is a new consumer app in development.
This year, we are launching and developing a new PayPal app to create habit, Chriss said. He later admitted that PayPal’s mobile experience for consumers has been disappointing. However, with the newly introduced innovations, we expect to continue to see improvements in this area.
Recently, PayPal introduced a number of features powered by artificial intelligence, including personalized cashback offers in the app and smart receipts that offer suggestions on what to buy next from the same brand, for example. These features and others were announced as part of a “first look” experience in January, which Chriss said was implemented in 60 days, rather than the “months or years” it might have taken.
Conclusions
The app is preparing for the enactment of the European Union’s Digital Markets Act (DMA) and suggests that it will be ready to offer “offline” payments when that happens. With the new rules allowing third-party apps to access NFC technology and consumers to select a third-party contactless payment app as their default, PayPal has an opportunity to capitalize on the changes made by Apple. While no specific details were provided on PayPal’s future plans, CEO Alex Chriss indicated that the company is working to meet the needs of customers who wish to use PayPal outside of the online payment world. With its wide use in Europe and its partnership with Apple, PayPal could play a significant role in the future of “offline” payments.