paypal and visa partnership

What the PayPal and Visa Partnership Means for the Future of Payments

Posted: July 26, 2016 | Updated:

Discovering Visa and PayPal were partnering up has shaken up the credit card processing industry. It is believed that everything from merchant services to eBay will be affected. Some immediately lauded how the partnership will enhance in-store NFC payments. The most cynical critics believe Visa, with PayPal under its watchful eye, will be better suited to tackle competition like Checkout.

The major reason this partnership has stunned the industry is because company heads at Visa and PayPal previously expressed opinions that could be interpreted as being diametrically opposed to ever working together.

Visa CEO Charlie Scharf has stated that payment players – merchant services, credit card processors, etc. – were either against Visa or with Visa. He believed “co-opetition” did not reflect how the traditional payment ecosystem and standard network model had operated for over five decades. The success of PayPal’s ACH and the many accounts it held contradicted this and, for Visa, made PayPal a serious concern.

Meanwhile, Dan Schulman, CEO at PayPal, has made it quite clear he saw PayPal as a new and unique entity after its break from eBay. Schulman has made it clear that he was running a very different enterprise. He stated the company was primed to look at consumer options and, yes, partnerships. As the driving force behind ACH, PayPal was pretty much indifferent to tender types.

Among the most interesting notions to come out of the partnership is that it will energize in-store NFC payments. Others took issue with PayPal’s business model being totally overshadowed by its new partner’s traditional credit card processing. Some analysts wondered if Visa would force PayPal to disband its business model and take on a more traditional credit card processing operation. Whatever is to come, the market took notice of the potential disadvantages. The day after the announcement, PayPal saw its stock ending down 6.75%.

Visa is the biggest credit card network in the world. PayPal is the world’s largest digital payment network with an estimated 188 million active users. PayPal’s merchant services are beloved by vendors and businesses globally. PayPal also has dormant accounts that this partnership could reinvigorate with accountholder incentives.

Still, while one can make it look good on paper, all the credit card processing in the world cannot guarantee this will work.

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Categories: Industry News, Credit Card Processing, Financial News, Merchant Services, NFC

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