There was huge news from the virtual wallet sector on Wednesday, as Discover and PayPal announced a partnership that will extend PayPal’s reach by approximately 7 million merchants.
Starting in spring 2013, any national location that accepts Discover card will also accept PayPal payments, allowing PayPal users to pay for purchases with only their cell phone number and a PIN code. PayPal users will also be issued a card connected to their account, which will track loyalty points, rewards, coupons, and promotions. The program will initially be rolled out exclusively in the United States, but is expected to expand to merchants across the globe in the future.
According to PayPal, they have 113 million active online customers worldwide, 50 million of whom are in the United States. They anticipate huge growth in customer activity when PayPal users can actually pay for items in-store instead of online.
“We couldn’t be more thrilled to work with Discover. This relationship quickly extends PayPal’s reach to millions of merchant locations nationwide and is a milestone moment for us that will create new benefits for Discover merchants without requiring new hardware or software,” said PayPal’s vice president of retail, Don Kingsborough. “This relationship will deliver a truly seamless digital wallet.”
More Cash Back Bonuses in Store?
There was no mention yet of Discover’s cash back bonus awards and whether or not customers who have both a Discover Card and a PayPal account would benefit from extra incentives or loyalty rewards. Details of the partnership are still being ironed out and as the program’s spring debut nears, customers will likely know more details that will let them decide whether they will get more cash back by using their Discover Card or their PayPal account when paying for purchases.
Discover has an established track record of giving customers rewards with real value, and has been a leader in loyalty rewards since they issued the first Discover card in 1985. They were the first credit card to offer five percent cash back in rotating categories, something now offered by other credit cards, like the Chase Freedom card.
PayPal as yet does not have any customer loyalty programs in place for their online customers, and in fact takes a percentage of payments received by sellers, as any eBay customer can attest. PayPal has long been the preferred way for eBay buyers and sellers to exchange funds. PayPal does offer a credit card – the PayPal Extras MasterCard – that does offer promotional deals and loyalty points, but the Discover deal is a separate entity from the PayPal Extras MasterCard and loyalty points accrued on that card, will not come into play for in-store PayPal payments.
What the Finance World is Saying
As reported by TIME Business, finance experts on Wall Street reacted positively to the Discover/PayPal announcement. Equity research analyst Colin Sebastian said via Reuters that “this initiative further distances PayPal’s digital wallet ahead of other mobile payment platforms. PayPal continues to take measured and deliberate steps to extend its reach into the ‘bricks and mortar’ channel.”
JPMorgan’s Doug Anmuth was enthusiastic as well, saying “We continue to believe PayPal is well-positioned in offline payments and are incrementally more positive on shares as the deal accelerates PayPal’s offline acceptance faster than we had previously expected.”
Citi’s announcement was more measured, saying they are “unclear” who the core users of this deal will be and what the value is for merchants. “However, we think PayPal clearly has offline payments momentum here,” says Citigroup’s Mark Mahaney.
Clearly, there is more than a little momentum behind this deal, which is poised to bring the new cashless society closer than ever before and make it easier than ever for customers to pay for purchases and get rewarded for doing so.