On Tuesday, PayPal announced its partnership with MasterCard. The partnership will expand payment options and ultimately help PayPal become a universally accepted payment method in stores.
The pact between PayPal and MasterCard will make MasterCard a payment option within PayPal. This will, in turn, expand PayPal’s in-store presence. In addition, PayPal will implement Masterpass as a payment option for PayPal’s Braintree merchants.
PayPal’s partnership with MasterCard follows a similar pact made with Visa earlier in the year. In PayPal’s deal with Visa, Paypal was made an option for people who used their smartphones to pay in stores. The deal with Visa also benefited PayPal’s Venmo service. Venmo users can now withdraw money from their cards after they’ve linked their Venmo account to their Visa debit cards. MasterCard will share the same benefits on Venmo with MasterCard Send.
With PayPal’s increasing competition in the tap-and-pay industry, PayPal’s partnerships are aimed to increase PayPal usage for in-store purchases. Rivals such as Apple Pay, Android Pay, and Samsung Pay are making their mark, leaving PayPal in the dust. Some businesses already launched their own digital payment services such as Starbucks and Walmart.
PayPal will spread its influence by allowing consumers to use their tokenized MasterCard to make in-store transactions at more than 5 million merchants globally.
The partnership between PayPal and MasterCard also allows consumers to cash out funds from their PayPal account to their MasterCard account. In addition, MasterCard will no longer charge PayPal with a digital wallet operator fee.
PayPal’s partnership will also eliminate the need for linking bank accounts since Visa and MasterCard are becoming options. PayPal will distinguish MasterCard as a clear payment option and will allow its users to make MasterCard their default paying method.
Along with PayPal’s partnership with MasterCard, the two companies also agreed to an extension for the PayPal Business Debit MasterCard Program which is implemented in the U.S. This is after the extension for PayPal Extras MasterCard co-branded credit card program.
PayPal investors aren’t sure what to make of this pact. Even though PayPal expands its payment service in-store and online, PayPal’s deals with Visa and MasterCard can hurt the company short-term. With free bank transfers, PayPal will have to pay. While these concerns caused stocks to drop during the time of the Visa deal, PayPal’s deal with MasterCard has stocks increasing.
