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PayPal-Visa Deal Signals Some Agreement Within Fragmented Mobile Payments Industry

The longstanding rivalry between PayPal and Visa appears to have been quelled, with the companies striking a deal designed to make it easier for Visa cardholders to use the online payments system.

With mobile payment transactions expected to reach $27 billion in 2016, many companies are seeking a place at the table. As mobile payments overall continue to grow, PayPal and Visa are essentially bending to consumers’ will, with an understanding that a more open, inclusive payments platform will reel in more transactions for everyone. But more importantly, they’re showing that two major payments businesses can play nice in an environment that often has been characterized more by exclusion than cooperation.

Mobile payments remains a largely segmented industry, with Apple, Google and Samsung all making plays with their own technologies. Even within these hardware universes, there are restrictions: Apple Pay online can only be accessed by users with an iPhone 6 or later, while Samsung Pay users have to own a recent Galaxy or Edge smartphone.

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Even retailers have sought to play expanded roles in payments, with a collective of major brands forming the Merchant Customer Exchange (MCX) in 2012. The consortium attempted to launch its own mobile payment platform, CurrentC, which ultimately failed to get beyond the testing phase.

Amazon and Walmart have broken through with their own competing systems despite the widespread use of other mobile payments platforms at their retail locations, with the latter finally releasing the service in all its stores in July 2016. More recently, MasterCard introduced its multi-channel payments solution, Masterpass, designed to work online, via mobile sites and apps and in stores.

What The Visa-PayPal Partnership Means To The Consumer

While retailers may remain guarded regarding payment options, the PayPal-Visa relationship may be a step in the right direction to break down barriers on the service end of mobile payments.

Consumers with a Visa card and a PayPal account will assuredly gain the biggest benefits from the partnership. For example, Visa debit card customers can move money instantly via PayPal and its Venmo mobile wallet service. Previously, there has been a waiting time for funds to clear in those transactions.

As part of the partnership:

  • Visa cards will be presented as a “clear and equal” payment option during enrollment and subsequent payments, where consumers can set their preferred payment method;

  • Visa digital card images will be incorporated into payment flows;

  • PayPal will not encourage Visa cardholders to link to a bank account via Automated Clearing House (ACH) network; and

  • PayPal will support and work with issuers to identify consumers who choose to migrate existing ACH payment flows to their Visa cards.

PayPal also will join the Visa Digital Enablement Program (VDEP) to expand POS acceptance for the PayPal digital wallet to all physical retail locations where Visa contactless transactions are enabled.

“Giving consumers choice in how and where they pay is essential to our goal of being a customer champion and we welcome the opportunity to work with more partners like Visa who share our vision,” said Dan Schulman, President and CEO at PayPal. “This agreement opens new avenues for PayPal to collaborate with Visa, financial institutions, and others in the payments ecosystem to deliver greater value, more choice, and new experiences for our joint customers wherever they transact — online, in-app or in-store.”

While the partnership is designed to build a better working relationship between PayPal and Visa, the companies will still remain competitive to an extent, especially while Visa continues to operate its own payment service, Visa Checkout.

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