PayPal’s New ATM-Like Weapon

NEW YORK (MainStreet) -- PayPal customers who want to use their accounts to draw cash out of an ATM have, until now, hit a brick wall. But a new deal with a big-name coin machine vendor may change that equation, and soon.

In a May 16 blog post by Dan Schatt, head of financial innovations at PayPal, Schatt largely derides the payment industry’s inevitable march toward mobile wallets.

That’s no small cheese. Mobile wallets are a burgeoning technology, with more and more consumers participating in the market. According to JiWire, a San Francisco-based mobile advertising firm, 37% of U.S. consumers have used mobile wallet technology in the past 90 days.

What’s more, JiWire reports that 46% of consumers who have used a mobile wallet have use PayPal, compared to 29% using Amazon.com and 18% using Google’s Wallet.

"This rapid adoption of mobile wallets reinforces that the market is ripe for this sort of technological advance. Consumers seem to be both comfortable and curious about using their mobile phones to purchase," Dee Dee Paeseler, director of strategic marketing at JiWire, said in a statement. "This trend is likely to help both brands and retailers close the loop on mobile transactions, ultimately taking them to the next level."

But Schatt says consumer payment technologies are not all about mobile phones anymore.

 “While many of our competitors are focused on the mobile wallet—at PayPal, we’re busy bringing our users an array of commerce solutions in both the online and offline worlds," he said. "We are doing this from your PayPal account online, to connected devices like Xbox, using PayPal in-store at The Home Depot, and of course, the smartphone. In short, we’re making money work better in today’s multi-channel shopping environment. It’s time to 'think outside the phone,' so to speak.”

He cites a new deal between PayPal and Coinstar, a coin-counting service with more than 19,000 kiosks in supermarkets, pharmacies, restaurants, banks, and convenience stores. The two firms have launched a trial campaign where PayPal customers can take cash out of a Coinstar machine, using their PayPal accounts.

All PayPal consumers have to do is to go to a Coinstar machine, enter their PayPal password or their mobile phone number, pay a $3 transaction fee, then load up on cash or coins straight from their PayPal account. No bank is needed as a middleman.

The pilot program is only operating in Dallas right now, but Schatt says that there is plenty of interest from consumers who have used the service.

“The results have been impressive,” he says. “We’ve found that 40% of our testers go back to use PayPal at Coinstar machines again and through survey research, we’re getting high marks from our users on the integration.”

Previously, PayPal customers have largely availed themselves of the service online, so the forays into ATM-like services are new wrinkle for PayPal, morphing the service into a bank.

Clearly, PayPal, with 110 million active users, sees consumer payments as more of an online service, and the Coinstar deal is testament to that. Mobile wallets are certainly part of the company’s strategy, but make no mistake – PayPay is aiming way higher than that.