Why Is PayPal Still So Hard to Find on Mobile Devices?

Seven months isn’t a long time for most companies, but it’s practically an era in itself on the hyperkinetic mobile web. Since last July, Motorola (s mot) has launched the Droid and Google (s goog) its Nexus One. Tens of thousands of new apps have been created — Apple (s aapl) even finally unveiled its iPad, which could potentially rewrite the rules for mobile apps entirely.

One thing that hasn’t changed, however, is PayPal’s (s ebay) visibility on mobile devices. Last July, PayPal opened a beta of its open platform so that developers could embed the payment system in their applications. In November, it went further, staging a developers conference to officially open the platform and setting up the X.com site for APIs and documentation.

If the timing felt a bit slow, the strategy was sound. As AuctionBytes noted, “PayPal believes payments for services is a bigger opportunity than e-commerce.” The Times’ Bits blog painted a clear picture of what it could mean:

PayPal imagines a future in which cash is obsolete, as are wallets. We will buy movie tickets by touching a movie poster on the street and order drinks from a touchscreen embedded in the bar.

It’s a nice vision. But in the months since, PayPal hasn’t really left much of a footprint in mobile apps. I’m still paying for movie tickets mostly with cash, and the Fandango app I downloaded asks me for my credit card number, not my PayPal account. PayPal is now an option in the iTunes App Store, but few people who entered a credit card number in iTunes years ago will bother to go back and change their settings in order to use it. In short, PayPal is very much on mobile devices, but pretty much invisible.

Instead, the buzz in mobile payments in recent months has been centered on Square, whose little white dongle turns an iPhone or iPod touch into a credit and debit card reader. Square is clearly a threat to point-of-sale companies like VeriFone (s pay), but by making plastic cards even more useful on the mobile web, it could be a big obstacle to PayPal as well. You can swipe plastic through a Square reader, but not your PayPal account.

PayPal has been at once a success story and a company that hasn’t quite lived up to its potential. Its revenue has grown 45 percent in the past two years, while eBay’s main marketplace business has seen revenue fall 1 percent. But PayPal has never really disrupted credit and debit cards in e-commerce. And outside of eBay, it hasn’t become a default payment method on other sites, notably Amazon (s amzn).

The web is full of consumer complaints about PayPal, but my experience with the service over several years have always been positive. Even so, most of my purchases at Amazon or other e-commerce sites use debit card payments that bypass PayPal. It’s just a pattern I fell into and haven’t felt a need to change.

That pattern will be even more deadly on mobile e-commerce. Smartphones like the iPhone and the Droid – along with the most popular apps — resonate because of their simple interfaces. They are designed to eliminate tiresome choices. No one wants to choose whether to pay by credit card or PayPal each time they make a mobile payment. And that is PayPal’s challenge — not simply to be an option on the mobile web, but to be the default.

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