The announcement last week that PayPal is partnering with Discover Financial Services to offer a retail “digital wallet” payment option could result in a windfall for millions of brick and mortar merchants who already accept the Discover Card.
Beginning in May of 2013, PayPal’s 50 million customers in the U.S. will be able to use their service as a payment option at any of the 7 million U.S. retail stores that accept Discover card. That’s good news for merchants, because no additional hardware will have to be installed or upgraded to accept PayPal.
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The offering is also simple for PayPal users, who will be able to make purchases at participating stores and businesses by using their cell phone number and a PayPal pin code. As the program evolves, PayPal plans to provide users with a card that is connected to their PayPal account.
PayPal, a division of eBay, is known as a leader in online payment and, since its beginnings in 1999, has proven to be an easy way for consumers and online merchants to send and receive money. Discover card ranks second behind American Express in overall customer satisfaction, according to the latest figures from J.D. Power and Associates’ U.S. Credit Card Satisfaction Study.
PayPal and Discover aren’t alone in developing a mobile payment program. Recently, a collaboration of leading retail companies, including Best Buy, Target, 7-Eleven and Walmart, formed a joint venture called the Merchant Customer Exchange to offer a new platform for smartphone-based transactions, and mobile payment processor Square has partnered with Starbucks to give consumers more payment options at Starbucks locations. The rapidly evolving mobile commerce landscape, helps retailers increase customer engagement and drive incremental sales.
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Since consumers can choose to fund purchases using their checking account, savings account, or any credit card account they have on file with PayPal, retailers who accept Discover card can expect to see the use of PayPal digital wallet to drive sales and engagement from the offline world to online.
PayPal hasn't settled on the fee it will charge merchants when consumers use PayPal to make a purchase, a portion of which will be paid to Discover for use of its network.
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