PayPal wants customers to pay using their accounts as mobile wallets, and credit card networks want customers to sign up for the networks’ own mobile payment services. Sounds like a perfect pairing, right? That’s what Visa thought a few months ago, and Mastercard has concluded now.
The companies will trade favors, the Wall Street Journal reports: instead of encouraging customers to make bank account transfers the default method through which they pay for everything, PayPal will instead allow them to use payment cards.
The importance of the Visa deal was that it requires PayPal to let customers choose any Visa credit or debit card as their default payment method. The site normally makes payments from a customer’s bank account and/or PayPal balance the default payment method.
Deals like this are nothing new, of course: just two months ago, PayPal and Visa announced a similar partnership for in-store purchases. Four years ago, PayPal and Discover announced a similar partnership, which would have involved PayPal issuing physical cards to users that would allow them to make payments in stores from their PayPal accounts using the Discover network.
Both deals with credit card networks mean that users of PayPal and of Venmo, a mobile app that people use to pay their pals, will be able to use their balances more easily as a form of mobile wallet in real-life stores.
Visa and Mastercard want to be part of the mobile payments market, too, and it’s a logical step to work with a company where tens of millions of consumers already have some form of digital wallet.
One of the goals of these deals is to cut down on the payments that PayPal makes to credit cards and banks: by negotiating mobile wallet deals, PayPal may get a break from its partners on fees, which are the reason why the company encourages users to provide their bank account number for ACH transactions.
PayPal Strikes Deal with MasterCard to Allow Payments in Stores [Wall Street Journal]
by Laura Northrup via Consumerist
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