Your New Digital Wallet: In The Cloud But Still Tethered To Fees : All Tech Considered PayPal and other tech companies have set their sights on transforming how we shop at retail stores. New services allow customers to pay with their smartphone, or even just a personal identification number and a cellphone number. But these new digital wallets are still tied to transaction fees charged to merchants.
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Your New Digital Wallet: In The Cloud But Still Tethered To Fees

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Your New Digital Wallet: In The Cloud But Still Tethered To Fees

Your New Digital Wallet: In The Cloud But Still Tethered To Fees

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  • <iframe src="" width="100%" height="290" frameborder="0" scrolling="no" title="NPR embedded audio player">
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This week, Microsoft announces it was building a sort of digital wallet into its next generation of mobile phones. And that means a new role for PayPal, the online payment service. It's had a big presence on the Web for a while, but until recently was nowhere to be found in the world of traditional retail stores. Now PayPal is accepted in more than 2,000 Home Depot stores across the country.

It and half a dozen other tech companies are hoping to change the way that we shop, as NPR's Steve Henn reports.

STEVE HENN, BYLINE: Excuse me, do you sell like carpet spot remover?


HENN: More than once I've run out in the midst of a minor home repair emergency and forgotten my wallet.

I have kids and they spilled olive oil on a carpet. Will this actually take that off?

UNIDENTIFIED MAN: This should be able to take it off.

HENN: But now freaking out and leaving your wallet behind doesn't necessarily mean an extra trip.

Enter phone number.

At Home Depot recently I checked out, simply by typing in my mobile phone number and a pin.

Enter your PayPal pass code.

And PayPal isn't the only company doing this kind of thing. Square, a start-up in San Francisco, uses GPS in you phone to show a picture of you to a store clerk when you walk into their shop. To check out, you can just give them your name.

And that's it. I'm done. I didn't have to swipe anything, scan anything. Half a dozen tech companies in Silicon Valley are investing millions in new technologies that aim to make spending money even easier. One customer...

DAVID MARCUS: They actually paid skydiving. And it worked, and it was for real.

HENN: David Marcus Pay Pal's president.

MARCUS: With a digital wallet, all of your coupons, your loyalty points, everything will be deducted automatically from all of your purchases so you don't have to think about it.

HENN: Other companies, including Apple, are doing the same thing. And Keith Rabois - chief operating officer at Square says mobile payments will also give retailers much more information about their customers. Using GPS in your phone, they could even know when you walk into a store and if you leave without buying anything.

KEITH RABOIS: You can identify your best customers and track their sales over time.

HENN: Intuit and Google are attempting to break into this business too. But with all these high-tech giants trying to make this work, the leader in mobile payments is...

JASON OXMAN: Starbucks.

HENN: Jason Oxman is president of the Electronic Transaction Association.

OXMAN: Starbucks currently is the largest mobile payments network in the country.

HENN: Sorry, Google.


HENN: Starbucks has an app that lets you pay for coffee with your phone, and right now it has more mobile users than Paypal, Google Square, or anyone else. Still, Oxman's optimistic about the future of the digital wallet.

OXMAN: It really creates new opportunities for merchants to accept credit cards and debit cards.

HENN: It used to cost thousands of dollars to get set up to take credit cards. Now all you need is a smartphone. Oxman believes the digital wallet isn't going to replace the credit card industry any time soon. In fact, he says if anything, he thinks it will help it grow even faster. And this industry is already enormous. Last year, consumers around the world used debit and credit cards more 135 billion times.

In 2011, people used plastic to pay for more than $11 trillion in purchases globally. And if you're in the transaction business, there are lots of little ways to make money. Visa and MasterCard charge stores like coffee shops swipe fees on every transaction. Last year in the U.S., card companies and banks made close to $50 billion this way.

MALLORY DUNCAN: And that's caused a lot of angst within the retail community.

HENN: Mallory Duncan is at the National Retail Federation. Duncan was hoping that tech companies breaking into this business would try to drive those fees down. But that's not happening. Instead, companies like PayPal and Square have built their technologies to work in concert with the credit card companies. They simply link your Smartphone or an online account to the cards you already have.

DUNCAN: In which case you get you get all of the old fees, many of the old problems, and additional new costs. Not an ideal solution for anyone.

HENN: On the other hand, all these new technologies do make buying stuff even easier. And my wife was pretty happy to come home and see that those olive oil stains on the carpet were gone. Steve Henn, NPR News.

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