Soon, your scarcely used Paypal account will be good for something besides receiving AdSense payment, running Facebook ads, and the occasional Home Depot run. On Tuesday, the venerable payments platform announced a partnership with payment processor MasterCard to allow payments in stores, online, and beyond. This will provide increased value to Mastercard cardholders, financial institutions, and PayPal customers.
Before now, banks and credit cards aren’t a fan of its free bank transfers and other attempts to push online payment over the conventional variety. To make everyone happy, PayPal will make Mastercard a “clear and equal” payment choice in its wallet (complete with an image of your card), let you set the card as a default payment method and will “not encourage” you to link a bank account if you’re a Mastercard customer.
Under the expanded partnership, consumers and small businesses will be able to instantly cash out funds held in their PayPal accounts to a Mastercard debit card. PayPal will also be provided certain financial volume incentives and, as a result of the commitments made under this agreement will no longer be subject to the digital wallet operator fee.
“Customer choice and partnership are fundamental principles for PayPal that guide how we operate as a company, giving our customers greater opportunities to more easily manage and move their money online, in app and in-store,” said Dan Schulman, president and CEO, PayPal. “With each partnership agreement that we sign, we further expand the ubiquity and value of the PayPal brand and improve our own economics. Mastercard has been a trusted partner for many years. By collaborating and innovating together we will continue to help move digital payments forward and improve payment experiences for our mutual customers.”
“Whether paying in the physical or digital world, consumers want to see the familiar Mastercard brand from their chosen issuer,” said Ajay Banga, president and CEO, Mastercard. “The expansion of the partnership with PayPal further reinforces our commitment to our billions of cardholders across the globe to provide them the choice to pay when, where and how they want while delivering the simple and secure payment experience they’ve come to expect from Mastercard.”
Delivering Optimal Choice and an Enhanced User Experience for Cardholders:
To advance the PayPal and Mastercard shared vision to offer consumers greater choice and flexibility to manage and move their money:
- Mastercard will be presented as a clear and equal payment option within the PayPal Wallet, making Mastercard and their issuers easily identifiable to the consumer when transacting.
- Customers will see a familiar digital representation of their Mastercard from their chosen issuer, ensuring them that all payments made through PayPal are protected with the same safety and security measures that they have come to expect when using a Mastercard.
- Customers will be able to select Mastercard as their default payment method to allow for quick and easy check-out.
- PayPal will not encourage Mastercard cardholders to link to a bank account via ACH.
- PayPal will expand its presence at the point of sale by utilizing tokenization services from Mastercard. This will allow consumers to use their tokenized Mastercard in their PayPal Wallet to make in-store purchases at the more than 5 million contactless-enabled merchant locations across the globe.
Improving Data Quality and Routing for Issuers
Continuing to build on the progress they’ve made in recent years, PayPal and Mastercard will jointly focus on the following:
- Continue to enhance data quality to deliver consistent transaction-level data for Mastercard issuers.
- Provide greater transparency for transactions at the point of sale through tokenization.
- Collaboratively work with issuers to identify consumers who choose to migrate existing ACH payment flows to their Mastercard cards.
Bringing More Choice for Merchants
Masterpass will be added as a payment option for merchants that process payments via Braintree, a PayPal company. Merchants that leverage Braintree as their payment platform will be able to easily integrate Masterpass into their checkout experiences, providing a seamless user experience for consumers.
In addition, Mastercard and PayPal have agreed to a multi-year extension of the PayPal Business Debit Mastercard program in the United States. This expansion of the partnership between the two companies comes after the recent announcement that PayPal and Mastercard agreed to a multi-year extension of the PayPal Extras Mastercard co-branded consumer credit card program.
A Second Look at PayPal’s Deal With MasterCard
But some analysts have argued that this comes at the expense of profitability in the short term. The moves shift PayPal away from promoting free bank transfers to fund customers’ transactions and toward the networks, which charge a fee.
There also is fierce competition from tech firms such as Apple Inc., and young payments providers such as Stripe Inc., to win over merchants and consumers in big numbers in the mobile and one-click online-payments realms.