Cash, Check, or PayPal?

So you're at the mall, meticulously crafting a new image at your favorite apparel store. At one point, you had to beat another shopper for the last pair of the perfect shoes in your size. Safely in the checkout line, you realize that you left your wallet in the glove compartment.

Today, that scenario is somewhere between a hassle and a nightmare. But leaving the wallet behind is getting easier to stomach, thanks to the near-field communication technology that connects your smartphone to the checkout systems with a simple tap. NFC payments rest on the idea that it's easier to grab the phone that's always by your side than first finding your wallet and then shuffling through a handful of credit cards.

Google (Nasdaq: GOOG  ) already supports this alternative in the Google Wallet service, backed by a number of banks, credit card issuers, and other partners. Other smartphones are widely expected to add similar NFC-based services in 2012 or 2013.

But eBay (Nasdaq: EBAY  ) wants a piece of the action, too -- without depending on any hardware at all.

The online auctioneer's PayPal arm recently launched a test program in Home Depot (Nasdaq: HD  ) stores where you could either run a PayPal credit card at checkout (boo, hiss, not a revolution at all) or tap in your phone number and passcode on a terminal (the real innovation here).

Either way, your caulk tubes and mulch bags get charged to your PayPal account, as if you'd just won an eBay auction to get them. The home improvement crowd may not seem like a great demographic for this non-traditional kind of payment service, but the Home Depot test worked so well, PayPal has now rolled out the service at all 2,000 locations nationwide.

This week, PayPal added another 15 national retailers to the in-store payments program, and this time it's a more appropriately targeted bunch. The wallet-free solution will soon work at youth-oriented clothing chains American Eagle Outfitters (NYSE: AEO  ) , Aeropostale, and Abercrombie & Fitch (NYSE: ANF  ) , as well as hip juice-slinger Jamba Juice.

All of these chains cater to younger and more connected crowds. Customers at these retailers seem far more likely to have a PayPal account and know what to do with it than your average Home Depot shopper. And if you want proof that PayPal wants to skew young and tech-savvy, consider that leading toy store chain Toys R Us and tech outlet Tiger Direct are part of the new slate, too.

Four of the new PayPal checkout partners are also in the Google Wallet crowd, so there's nothing exclusive about either of these newfangled payment services. Spreading the love is smart: Open competition should drive faster adoption of all these technologies, since consumers don't need to pick their payment services based on what their favorite retailer happens to support.

As evidenced by the growth of NFC, financial services remains a vibrant and innovative field. In fact, some of the world's smartest investors are pouring assets into this sector right now. Find out what these geniuses are buying in our brand-new special report: "The Stocks Only the Smartest Investors Are Buying." The report is totally free, but won't be available forever, so grab your copy right now.

Fool contributor Anders Bylund owns shares in Google but holds no other position in any of the companies mentioned. Check out Anders' holdings and bio, or follow him on Twitter and Google+. The Motley Fool owns shares of Aeropostale and Google. Motley Fool newsletter services have recommended buying shares of eBay, The Home Depot, and Google. The Motley Fool has a disclosure policy.

We Fools may not all hold the same opinion, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


Read/Post Comments (6) | Recommend This Article (7)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On May 29, 2012, at 3:51 PM, pondee619 wrote:

    " NFC payments rest on the idea that it's easier to grab the phone that's always by your side than first finding your wallet and then shuffling through a handful of credit cards."

    Huh? Isn't your wallet always in your hip pocket? How did you get to the mall without your wallet and Drivers License? And,your wallet never needs charging.

    Don't all Fools pay off their credit card balances each month. Why would a Fool need more than one credit card? If it is for reward points, does Pay Pal really help?

    Maybe the "idea" isn't so "rest"ful.

  • Report this Comment On May 29, 2012, at 3:52 PM, NobodysFool2011 wrote:

    So how many times have you forgotten your wallet in the glove box if the car? Much less been in a competition to beat another shopper for a pair of shoes?

    Seems all very flimsy cases for usage of mobile payment technology. Then again, mobile payment is a rather flimsy technology that simply is not going to catch on anytime soon.

    As for Paypal's Home Depot test, walk into any Home Depot and ask the cashier if anybody is using the Paypal option. Most will say it's never been touched. The only success is in the spin.

  • Report this Comment On May 29, 2012, at 4:03 PM, wasmick wrote:

    PayPal: All the transactional costs of a credit card with none of the benefits!

    Where do I sign up?

  • Report this Comment On May 30, 2012, at 10:36 AM, SuntanIronMan wrote:

    Even in Japan (the country known for cellphone payments and RFID cards), it isn't as prevalent as you'd think. Although, non-cash payments in Japan in general aren't that prevalent... I wish they were though. I miss my basically empty American wallet (I don't like carry around too much cash), using a credit card for any and all purchases.

    I will say though, your scenario is pretty silly. Just as easy to forget your cellphone as it is your wallet. Maybe even more so when you get tired of certain people messaging you every few minutes, haha. And maybe it is just me, but I've never had much difficulty removing a credit card from my wallet.

  • Report this Comment On May 30, 2012, at 10:56 AM, SuntanIronMan wrote:

    Also:

    American Eagle Outfitters, Aeropostale, and Abercrombie & Fitch... yes, they cater to a younger crowd of people who use their products, but the people who are buying their products are their parents. Actual users of their products aren't the ones paying for them. These are teen retailers. When the user of the products is old enough to afford to buy their own clothes, they aren't shopping at these types of stores anymore. I'm only mid-20s and I'd feel too old if I walked into one of those stores, haha.

  • Report this Comment On May 30, 2012, at 12:24 PM, nuijel wrote:

    What about the business model? How much do Paypal and Google charge the retailer?

    The way I see it, the benefit will mostly be for the retailer, who may save on Visa fees. But for the final customer, these costs are invisible, so there is not much of an incentive here.

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