PayPal Hires Blackhawk CEO to Oversee Push Into Physical Stores
PayPal Inc., the online-payment processor owned by EBay Inc. (EBAY), hired Blackhawk Network founder Don Kingsborough to oversee its expansion into physical stores as it steps up competition with Visa Inc. (V) and MasterCard Inc. (MA)
Kingsborough, who led Blackhawk’s efforts to bring prepaid gift cards to Safeway Inc. (SWY) and other grocers, will be responsible for PayPal’s push into retail stores in the second half of the year, the San Jose, California-based company said.
“We’re going with a whole new experience that is different than the traditional card-like experience,” President Scott Thompson said in an interview. “That requires us to rebuild the whole infrastructure around point-of-sale. Don, because he did that at Blackhawk, is the type of person we need here.”
PayPal, which rose to prominence after being adopted as a payment system for EBay’s Internet auctions, is used in about 70 percent of the site’s transactions. In pursuing its next area of growth, PayPal is eyeing consumers using mobile devices and the physical storefronts where Visa and MasterCard dominate. The company plans to introduce a redefined point-of-sale system -- the equipment next to cash registers where consumers swipe credit cards -- with major retailers this year, Thompson said.
“The physical point-of-sale is the next showdown,” said Tom Noyes, a banking consultant at Davidson, North Carolina- based StarPoint LLP. “Visa and MasterCard are starting to see PayPal as much more of a threat.”
PayPal’s Bench
Thompson, 53, a former Visa executive who joined PayPal in 2005, has replaced most of the senior management team over the past two years. He’s brought in executives from Citigroup Inc. and American Express Co. (AXP) to boost the company’s expertise in security, customer service and compliance with banking regulations.
The management bench will help PayPal navigate the broader world of payments, where it expects its global market share to rise to 23 percent in three years, from 18 percent today, Thompson said.
“Everybody at the executive level today has done something bigger in their career than what they’re doing at PayPal today,” Thompson said. “That means they’re not connecting the dots for the first time.”
Kingsborough, 64, who is vice president for retail and prepaid products, will build on his experience designing and running the Blackhawk prepaid card network, which is owned by Safeway. Blackhawk sells gift cards from retailers such as Starbucks Corp. and Nordstrom Inc. at kiosks in Safeway and other grocers.
“Ten years ago that whole industry didn’t exist,” Thompson said. “Don, working with the Safeway executives, created that business from scratch. That’s exactly the mindset you need.”
Plastic-Free World
PayPal is not the only company seeking to promote a plastic-free world where shoppers swipe phones at cash registers in sandwich shops, enter mobile-phone numbers on a keypad to transfer money, and push funds to a service station from their Internet-connected car while pumping gas.
Efforts by Google Inc. (GOOG) and Apple Inc. (AAPL) to embed chips based on so-called near field communications technology into their phones are aimed at locking PayPal out of the nascent mobile- payments market.
At the same time, Visa, MasterCard and American Express are duplicating PayPal’s efforts. The companies spent, collectively, almost $3 billion last year to buy Internet-based payment processors.
“There are huge opportunities now even in the cracks between features that PayPal hasn’t implemented,” PayPal co- founder Max Levchin, who’s now an executive at Google, said at a technology event in January. “There’s opportunity by way of PayPal not having enough time to develop everything.”
Open to Developers
PayPal is trying to fill in those cracks by enabling software developers to build products on top of its service. Developers generated $1 billion in payments for PayPal in the first year it gave programmers access to its software code. Still, the project has hit obstacles. Osama Bedier, the executive leading it, joined Google’s payments team earlier this year.
PayPal says going after payments in the physical world will help it double revenue to as much as $7 billion by 2013. As shopping habits blur between online, mobile and physical stores, PayPal says its expertise handling consumers’ transaction data across multiple platforms gives it an advantage.
“The top executives of Visa and MasterCard must lay awake at night wondering how many years it’s going to be before these folks are substantially impinging on their business,” said Bill Smead, who holds EBay shares as part of $175 million in assets at Smead Capital Management Inc. in Seattle.
To contact the reporter on this story: Joseph Galante in San Francisco at Jgalante3@bloomberg.net
To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net
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