Once upon a time, PayPal was the undisputed leader in online payments. And then, the so-called ‘mobile revolution’ took the limelight away from online payments to mobile payment. Though PayPal kept pace with technology, the bullishness around Jack Dorsey’s Square and several other hot mobile payment startups kept the former on its toes.
Along the way, Google Wallet opened to a lukewarm response and PayPal alleged that Google was playing foul. Google Wallet didn’t really prove to be a threat for PayPal – as the ‘Big Daddy of Online Payment’ processed $3 billion in mobile-device payments last year, up from the company’s previous projection of $2 billion.
In March, PayPal formally unveiled ‘PayPal Here‘ – a platform designed to bring mobile payment options to all businesses, whatever their size. While the response to ‘PayPal Here’ was encouraging, the Square threat still loomed large. And those concerns weren’t unwarranted, as Square announced a game changing deal with Starbucks to give mobile payment a jolt.
Understandably, it was PayPal’s turn to respond and the online payment giant has done so in some style - announcing a deal with Discover Financial Services to bring PayPal access to the 7 million merchants across the country who take Discover, starting in the second quarter of 2013.
If you thought Squarebucks (Square + Starbucks) would be the next big thing in mobile payments, you need to watch out for what PayDiscover (PayPal + Discover) come up with. Game on!
There’s no doubt that this deal would have huge implications for the mobile payment segment. For a start, this is the biggest deal in terms of volume covering nearly 7,000,000 U.S. merchant locations. And when matched up with PayPal’s more than 50 million users in the U.S., it could further lead to gigantic proportions. For what it’s worth, PayPal is already accepted as a form of payment at 16 national retailers, including Home Depot, Abercrombie & Fitch and Jos. A. Banks.
The best part – merchants will not have to install or upgrade existing point-of-sale hardware or software as PayPal will be tapping into Discover’s existing systems.
Interestingly, Discover last week announced a deal with Google that would allow Discover customers to save their card information to Google Wallet. It also has a partnership in place with BillToMobile to offer carrier billing to Discover’s e-commerce merchants.
“The market has been looking for leadership as the payments space evolves and we think this relationship starts to deliver it,” wrote Don Kingsborough, PayPal VP of retail and prepaid products, in a blog entry on the company’s website. “It is a milestone for PayPal as it enables us to innovate at scale. One of the great things about this relationship with Discover is that merchants won’t have to install or upgrade existing point-of-sale hardware or software to offer PayPal.”
As part of the deal with Discover, PayPal plans to launch Discover debit cards that will be linked to a user’s PayPal account. The service is expected to go live by April.