A pilot program that lets Home Depot shoppers use PayPal to make purchases in stores could fundamentally change the way people pay for goods, an analyst said, effectively eliminating plastic in favor of mobile wallets.
For now, the joint pilot is in 51 locations. But in March, it should expand to all Home Depot locations. PayPal said it intends to offer the service at 20 major retailers by the end of the year. It is the first time people have been able to make in-store purchases using PayPal, which is a popular online payment company owned by eBay that allows people to pay for items without sharing their financial information.
Shoppers who have a PayPal account can pay for their items by swiping a PayPal card and entering a PIN, or by entering their cellphone number and the PIN. It allows shoppers to purchase goods without having to carry any form of payment with them, said Dwaine Kimmet, Home Depot's treasurer and vice president of financial services.
"The ease of use is just incredible," he said.
For Home Depot and other retailers, the PayPal purchases come with lower fees than debit or credit card purchases. PayPal users can link checking accounts, credit cards or other payment methods to their accounts, and the mix allows PayPal to keep fees lower than credit and debit card companies.
In time, the program will link gift cards and stores' private-label cards to the PayPal account, Kimmet said. He would not say how much Home Depot spent to upgrade its technology to work with PayPal.
The benefits for stores could be even greater than payment savings, said Gil Luria, senior vice president for Wedbush Securities. As technology advances, customers who scan an item with their phones could receive discount offers if they buy the items there, using PayPal. Luria said targeting customers specifically when they are in a store could help retailers push back against online retailers like Amazon.com.
And Luria said this is only the start of a large-scale trend.
"It's a very big deal," he said. "It's how we're going to pay in the future."
For PayPal, getting into physical stores allows access to customers in all their shopping lives, as they make purchases across a variety of platforms, from online to mobile to in-store. PayPal will sweeten the deal by allowing customers to opt into programs that connect their loyalty cards or offer specific discounts, said Donald Kingsborough, PayPal's vice president of global retail and prepaid.
Shoppers who use PayPal to make purchases would also be able to change their payment method after the fact, switching from a debit payment to credit if they change their minds after making a purchase.
"We want to do what the shopper wants to do," he said.