WHY I AM INTERESTED
I need to manage money and cash flow, it’s a large part of project management. Any tool that does so is of value in a cash intensive construction business. It’s one of the first and most advanced ways to process payments on a phone. In certain situations, it is a tool to help me collect in real time, or in advance of work (we often require payment in advance on change orders). I already have a Paypal account, as do most of my clients (87.2m people worldwide).
WHAT IT DOES
Paypal’s iPhone application does most of the things you can do on the online platform, including:
1. Shows your account balance
2. Allows you to transfer or receive funds via: Bump application
3. Add Money from Checks
a. Sign the back of your check, snap a clear photo of the front and back > wait for check to process (6 business days on average)
b. Some business banks offer a similar service, and clear times can be quicker than 6 days. In a cash flow business, this will eventually be a great service. Right now, six days still seems too long.
c. Add Money from Checks free, which juxtaposed to Paypal’s hefty credit card fees it quite the deal. I suspect the strategy is to get more people to use the service. After all, PayPal makes money by transaction fees and interest carry on deposits. The more money you have sitting there in your account, the more they make.
4. Paypal Local, which is in Beta as of spring 2011, lists local businesses that accept PayPal. Paypal Local shows you all of the businesses near you that accept PayPay or Bling. Whether you’re close to home or travelling, you can find the products and services you need. Use PayPal or Bling to make your purchases and get great deals and discounts, too.” As of Jan 2010, only one business subscribed to it, a logo design company, which offered 20%. Still this platform may be a viable marketing tool for businesses, including designers, builders & trade professionals.
HOW WELL IT DOES IT
Paypal is another big idea web application squeezed into a small package. While that is a round peg into a small hole challenge, it does it remarkably well. Its primary purpose is to transfer money in newer, simpler, safer, more direct ways, and it does that. I’d offer three critiques:
1. It’s a bit irritating to enter the password each time, but I understand the concern over security. You can extend the amount of time you don’t have to re-log on, but it maxes at 72 hours.
2. There’s a split bill function that seems out of place and cluttered, particularly if you only intend to use the service for business purposes. Ditto on the ‘Collect Money’ function which is only useful for fraternity beer buys where one guy pays and the rest need a reminder to cough up for the kitty. I can’t see how a builder would use it.
3. The biggest deterrent is the fee structure. One off charges are 2.9% + .30 per transaction for sales under $3000/mo, scaling down to 2.2%+.30 for accounts exceeding $10,000/mo. Still, that’s a lot of dough. Meaning a cabinet change order for $15,000 would cost $330.30 to collect. There are no monthly or set up fees, but that’s about double other credit card services, which are themselves too steep for most builders.
Rumors are rampant that the next iPhone (fall 2011) will have a radio frequency identification tag (RFID) that will allow the phone to function like a credit card. My hope is that it will circumvent the traditional merchant account modeling and be the transformative digital invoicing and funds transfer tool for builders. I’m hopeful, but not holding my breath. Apple is certain to monetize RFID, and we may end up with the same high % fee problem we have today.
PROS: There is a lot of function here. There are definitely times when you want to collect from a client but don’t have the tools to do so. This guarantees that tool is always there.
CONS: Cost, Fees are excessive for construction volume. There are more options than on most apps, so there can be a learning curve.
CONCLUSION: This function is on the cusp of something big, a transformation of how we pay for things. At the end of the day, it’s basically a way to send and receive money. Given that, PayPal may benefit from some technological austerity by doing away with what doesn’t matter. Less is, especially on an iPhone, more. Eventually, this will be a great thing for builders, but right now it’s too confusing for some and too expensive for most. For smaller service businesses, such as handymen, it could be very beneficial. But most builders won’t find use for it.
SCORE: 50/100
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