PayPal has announced its latest move in democratizing mobile payments to SMBs. It has enabled Tap to Pay functionality for Venmo and Zettle (two apps/services it owns) on Android phones. It previously activated this functionality on iOS within Apple Wallet, and now completes the puzzle with Android.
To be clear, what we’re talking about here is not just paying for things by tapping your phone against a compatible POS terminal – which has been around for a while. Rather, this is the ability to accept tap-to-pay transactions using a smartphone… thus sidestepping the need for a costly/bulky terminal.
This trend has been picking up (more on that in a bit), which is good and bad news. It’s obviously bad news for POS payment terminal providers or at least a segment of them. It’s conversely good news for small SMBs like farmer’s market merchants or “deskless” SMBs that transact on the road.
POS payment terminals are still safe in retail locations where phone-to-phone payments aren’t necessarily additive nor aligned. But for transient merchants or “very small businesses” (VSBs), this is an empowering trend. And PayPal now opens up the optionality further with Venmo and Zettle on Android.
The Backstory
Backing up, how did this trend first bubble up? In 2016, Apple brought NFC to the iPhone. This enabled iPhones to complete transactions by tapping them on compatible POS readers – a key piece of the Apple Pay puzzle. It then spent years forming partnerships with retailers and POS providers to achieve ubiquity.
Then came the next piece in the puzzle: accepting payments via NFC. In February 2022, Apple activated its massive network of NFC chips to not only tap to make payments but to accept them. The result is that every iPhone was suddenly a point of sale, thus democratizing payment processing.
This was empowering to highly mobile SMBs, as noted. We’re talking about home services professionals that can process payments directly at the job site. There’s also a long tail of VSB food trucks and farmers’ market merchants that increasingly conduct business outside of a traditional storefront.
With all the above, there’s one catch: Apple’s Tap-to-Pay framework is only as good as the payment gateways that work with it. Fortunately for Apple, it has a massive installed base that attracts any app or service provider looking for scale. So naturally, it first attracted top payment gateways like Stripe.
That was then followed by several others such as PayPal, including its products like Venmo. For example, Paypal Tap-to-Pay functionality operates within Apple Wallet, thus giving the technology greater surface area and accessibility to boost SMB adoption and acclimation.
Compatibility Matrix
That brings us back to the present, where PayPal now broadens that surface area by extending Tap-To-Pay to Venmo and Zettle on Android devices. As it continues to expand in these ways, it opens up the Tap-To-Pay possibilities to a larger swath of individuals and SMBs that have PayPal accounts.
PayPal is motivated to continue doing so because this capability is a customer acquisition and retention hook. Its growing coverage also impacts the value and functionality of Tap-To-Pay itself. In other words, this function operates on a network effect: both payer and payee have to be compatible for it to work.
So with PayPal, Venmo, Zettle, Square, iOS, and Android all in the mix, it engenders a compatibility matrix that benefits everyone. Those who benefit most – beyond stakeholders like Venmo, Apple and Google – are VSBs. As opposed to emerging tech that’s intangible (looking at you metaverse) this has real value.
There’s also a good product market fit here, as the Venn diagram between Paypal (including Venmo) and VSBs has a meaty center. Many already use Venmo for example. They do so by manually typing in account credentials during crowded farmer’s markets. Now their customers can just tap and walk away.
