PayPal’s key to winning mobile payments: data

PayPal’s years of experience in online payments is one of its biggest assets as it chases mobile and in-store transactions. But the by-product of all that experience — mounds of data — could be an even bigger weapon.

PayPal is in a unique position to use its growing cache of user data to create a better experience for consumers and more valuable services for merchants, said PayPal’s chief scientist Mok Oh, who has been with the company for a little over a year after the acquisition of WHERE. In a phone interview, Oh said that data gives PayPal an edge over other payment players, who will have less visibility into people’s buying habits.

“We are gathering data from small and medium sized businesses but also from large merchants, online, mobile, at the point of sale. As we go omni-channel, we have one of the biggest data sources there is,” said Oh. “What search is to Google, transactions are to PayPal. In commerce, transaction signal strength is stronger. It talks more about what people are willing to pay hard earned cash for something. It’s such a strong signal, it gives indication of interest and helps prediction.”

Of course, PayPal’s not the only one aware of the power of data. Google, for example, seems more interested in the data from Google Wallet than the potential revenue. And of course, the credit card companies are blessed with a huge amounts of transaction data. But Oh believes PayPal not only has a potent mix of transactional data but it can combine that data in real-time with a lot of other behavioral information that competitors don’t have access to.

Mok Oh, chief scientist, PayPal

For example, PayPal can tap product search data from eBay and its other properties such as RedLaser and Milo and combine that with third-party data such as social signals, to construct a clearer picture of what people want and how they shop. That combination can ultimately help PayPal create more personalized recommendations and can help draw real-time links between people, places and products.

“The question is how can we optimize it so people’s lives are made better by us knowing them better,” Oh said.

For merchants, the focus on data is also appealing. Businesses are looking for ways to identify and interact with their best customers, encouraging them to spend more. Oh believes that armed with PayPal’s data, merchants can better engage these customers and spur on more sales. The data, for instance, can help better reveal the way consumers are likely to move from one store to another based on their affinity to different businesses and their shopping habits. That can be an opportunity to reach out with an offer or ad to help walk someone in the door.

“Merchants really want to save money and we can help do that,” he said. “It’s all about, who is my customer and why do they want to buy?”

PayPal’s approach also helps merchants addresses the new realities of shopping, as consumers blur the lines between mobile, online and offline commerce, Oh said. Increasingly, commerce is coming in from every direction and businesses need to have a way of harnessing all that data.

PayPal still has a lot to do to make this data pay off. It’s still in the midst of rolling out payment systems for big retailers, small businesses and even restaurants. The more adoption it can get, the more data it can feed into its system. With so many competitors arrayed against it, PayPal will need to fight hard just to gain merchant acceptance. Oh is also building up PayPal’s data science team to handle all the information that it will try to leverage. He said PayPal’s set up isn’t as big as LinkedIn’s, but that’s what he has in mind. EBay’s purchase last year of New York-based Hunch, which will be the basis of a new data-focused tech center, will certainly help.

But it’s not just about information, Oh said. It’s also about marrying the data with a great user experience. PayPal hasn’t been known for its design in the past, though it’s been trying to improve up that reputation with newer products like PayPal Here. The company will also have to tread carefully in how it uses all this consumer data. It will need to give people views into what’s happening with their data and ways to opt out if they’re uncomfortable.

Regardless of whether PayPal is the best suited to exploit the boom in next-generation payments, I do believe Oh is correct in that data will be a key asset in this battle. The winners will not only have to create a great payment experience, but they’ll also need to deliver additional services that attract both consumers and merchants. Data is a powerful way to make that happen.

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