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Voice Recognition and No Wallet: PayPal's Vision of the Future PayPal's latest rollout, which allows merchants to accept payment through an application that scans QR codes, is one in a string of developments aimed at overhauling the way customers pay for goods.

By Catherine Clifford

Opinions expressed by Entrepreneur contributors are their own.

The brick-and-mortar shopping experience is changing, and small businesses have the potential to be frontrunners in the evolution process, giving them an advantage over their larger counterparts.

That's according to a new report from PayPal's senior director of corporate strategy and market intelligence, Scott Ellison. Ellison says that the combination of more people carrying smartphones, more back-end payment systems processing transactions in the cloud and increased proliferation of sensor technology connecting the two will lead to more and more transactions being processed without a consumer touching his or her wallet.

Here is a look at some of the evolutions in the retail experience that PayPal is predicting:

  • Retailers will communicate with consumers throughout the floor of a store through the customer's mobile device.
  • Sales associates will have access to individual profiles about each customer automatically and dependent upon specific scenarios.
  • Allow customers to check out on their own and on devices other than fixed registers making the shopping experience more efficient.
  • Identify and authenticate customers with voice recognition, biometrics or visual identification with technology.

As these new technologies become increasingly available and customers slowly become used to them, small businesses will have the opportunity to be the frontrunners in redefining the retail experience, according to Ellison. That's because when it comes to transitioning to new technology, entrepreneurs and smaller retailers have an advantage to larger companies in that they often have less physical and procedural overhead.

"There is the potential to sustain that competitive advantage over time by leveraging the continuing innovation that [point of sale] and retail will inevitably experience – and with which many larger merchants will be challenged to keep pace given their greater relative complexity," Ellison says.

Related: PayPal to Give Small Businesses Access to Working Capital in Minutes

The report from PayPal came as the San Jose, Calif.-based company announced the latest iteration of its point-of-sale innovation. This week, PayPal announced Payment Code, an application that allows merchants to accept payment by scanning a QR code that automatically generates on a consumer's smartphone. Alternatively, a merchant can use a randomly generated four-digit number appearing on a customer's mobile phone as part of the check in to authenticate a purchase. The app will be available early next year.

The company's interest in QR codes is a bit of a head-scratcher, as it could be seen as more of a chore for customers than simply paying with a credit card. PayPal says it is not looking to "push technology for technology's sake," but that the benefit of QR codes comes in a seamless integration of special discounts, gift cards or merchant rewards programs that might be involved in the purchase, according to a blog post about the new payment options. The new app, Payment Code, is free to merchants but processing fees still apply, according to a PayPal spokesperson.

The latest iteration comes on the heels of PayPal Beacon, a payment processing system released last month that registers a customer's smartphone and accepts a payment without the customer ever having to reach into his pocket or her handbag to retrieve the device. The entire payment process happens remotely with Bluetooth technology. Payment Code is the payment processor's solution for merchants that don't want to -- or can't afford to -- upgrade to a hardware solution that can display images, a PayPal spokesperson says.

Related: Pouncing on New SEC Rules, Entrepreneurs Develop Tech-Based Solutions for Accrediting Investors

Here's a look at how the PayPal Beacon system works:

Catherine Clifford

Senior Entrepreneurship Writer at CNBC

Catherine Clifford is senior entrepreneurship writer at CNBC. She was formerly a senior writer at, the small business reporter at CNNMoney and an assistant in the New York bureau for CNN. Clifford attended Columbia University where she earned a bachelor's degree. She lives in Brooklyn, N.Y. You can follow her on Twitter at @CatClifford.

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