PayPal has been bullish on boosting its payments business by tapping into the growing use of smartphones, and this week the company launched a service in Germany to extend that further into Europe. It is partnering with Orderbird, a Berlin startup that offers an iPad-based point of sale service to merchants, for a check-in service that will recognise users when they walk into participating businesses, and then, using those customer profiles, to let them pay for goods and services automatically from their PayPal accounts.
Jakob Schreyer, the CEO and founder of Orderbird, tells me that the initial pilot for this will be with a handful of cafes and eateries in Berlin to get more user feedback, iron out kinks and potentially add more features. (One extra feature Schreyer described to me: a way of offering users “menu cards” for participating eateries and cafes so that users can preorder whatever they want through their handsets.)
If all goes well, the intention will be to roll this out other kinds of merchants among the 1,700 already using Orderbird across Germany, Austria and Switzerland, as well as future customers in those countries and others where Orderbird will be launching. First up with new markets, he tells me, will be the UK, followed by Spain, France and Ireland.
Orderbird has been working on a deal with Paypal for a while now - as far back, in fact, as May 2012, when I wrote about its $3.5 million round of funding and asked Schreyer if he'd ever crossed paths with PayPal, since it sounded like something they could use. Then, it was still early days and so he wasn't prepared to make any official comment.
If the idea of PayPal working on retail check-ins that link up with seamless payments sounds familiar, that's because it is: the eBay-owned payments company wants to incorporate the same kind of purchase flow into its Beacon product - a piece of hardware that (like Apple's iBeacon) works with Bluetooth Low-Energy (BLE) technology to push alerts to customers when they walk into a participating store, restaurant or other space where they might make a purchase.
The logic behind PayPal partnering with Orderbird is two-fold.
First, PayPal, and owner eBay, have long followed a pattern of working on services in certain local markets before releasing them more widely (note that one of PayPal's first mobile check-in and payment services was actually in Australia). Second, PayPal has sought out ways of integrating their platform with whatever local consumers and merchants are already using.
Orderbird, with its 1,700 customers, is a logical partner in both of those respects. PayPal Here, the company's mobile payments service, is live in the U.S., UK, Canada, Australia, Japan and Hong Kong, but not Germany. Meanwhile, collectively, German-speaking countries are big business for eBay. Germany is eBay's second-largest market after the U.S.; and it is the biggest single economy in Europe. So it would make sense that PayPal would want to build on both of those facts (and also, just as a side-note, the head of PayPal, David Marcus, is Swiss).
At the same time, however, if PayPal went at it alone, it would have to build out a mobile payments business in its German footprint effectively from scratch.
And there is the question of what they would be able to offer to merchants. Gartner estimates that the mobile payments business has been a $235 billion opportunity in 2013, but those working at the point of sale have found it challenging to reach critical mass in their services.
One of the selling point for companies like PayPal, Square, iZettle, Payleven and others competing on the mobile-based payments front has been that they are offering merchants with no card systems a way of accepting cards. But for the thousands who already do accept cards using legacy systems, making the switch has been significantly less compelling.
“The benefit to switch needs to be big enough for retailers, and also interesting enough to get consumers to use it,” notes Schreyer. That translates into more value-added merchant services, for example those that link up with accounting systems and menus, let customers split checks, accept cash, and more - services that Orderbird has created and already provides to its customers. (It's also what drove Groupon to acquire and integrate the point-of-sale service Breadcrumb into its own mobile commerce play, although that service remains limited to the U.S. for now.)
From what we understand, PayPal is talking to other would-be local partners in other markets, and Orderbird is also speaking to a number of others in the e-commerce space - covering areas like delivery, for example. This points to how as the mobile commerce space continues to mature, we are seeing both increasing localisation, but also service consolidation, to sweeten the deal and make it more interesting for merchants and customers to buy in.
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