12/20/11 - Just about every organization and executive in the payments business is convinced the industry is changing — rapidly. The question, it seems, is how much and when?

Here are just a few hints:

eBay’s online payment unit PayPal has revealed plans to enter the discount coupon market and compete with online group vendor Groupon. The new service is expected to be launched across the US by April 2012, according to media outlet bbc.com. The company will partner with some of the top 200 US merchants, according to PayPal’s President Scott Thompson. PayPal’s strategy is to send targeted offers on users’ smart phones as they are passing stores. Many of the transactions spurred by the targeted offers will, of course, be conducted entirely “inside PayPal,” and will give retailers one more reason to accept PayPal at the POS.

Dwolla is a true alternative payment system that links to a bank account and makes account-to-account payments for a flat $.25 (free for payments under $10). Now, according to CEO Ben Milne, Dwolla will give users instant access to cash, by giving most a $500 credit line for just $3 per month. That effectively eliminates the delays in ACH processing that Dwolla users have had to tolerate. It also puts Dwolla on a technical par with debit while bypassing debit rails.

Square, yet another unconventional approach to payment acceptance for small merchants, says it now has more than 1 million merchants signed up for its service and is processing more than $11 million per day in credit/debit transactions.
Two million merchants isn’t all that far off. The company says they’re signing up at the rate of 30,000 to 50,000 per month.

All three of these announcements were made in the span of a few days this week. And, of course, what they have in common is that each, in some way, turns the traditional payments business model upside down or inside out. At this rate, it’s difficult to guess where things might be in five years.

SOURCE: Electronic Transactions Association