PayPal Raises Threat Level with Discover Network (and Discover Bank)

by Mercator Advisory Group 0

Discover Network may be offering the key to the city that PayPal seeks in its bid to become a viable offline payment form. Even though PayPal will still have to negotiate with merchants managing a direct connection to the Discover Network, the there will be no impact to existing point-of-sale hardware. That can’t be understated. PayPal now can focus on negotiating with merchant on the cost for acceptance, which one assumes should not be a barrier. For merchants aggregated under acquiring or ISO relationships, this alliance promises to open up a wide variety of channels will get the PayPal branded on storefront windows nationwide.

From a GigaOm article:

By riding on Discover’s network, PayPal can get into many more locations quickly, without requiring any significant integration work by merchants. That potentially puts PayPal at a big advantage against rival mobile payment systems such as Google Wallet, Isis, Square and others.

This strategy should leave PayPal free to pursue their most important goal: incentivizing consumers to use PayPal at the POS. For that to happen, the company will have to go head-to-head against entrenched card network brands. But PayPal’s alliance with Discover could yield additional benefits by leveraging Discover Bank’s capabilities to house consumer accounts and provide depository services. In addition, Discover’s expertise in creating rewards and loyalty programs may serve to bolster up the PayPal product and put it in a more relevant position to consumers making payment decisions at the POS should PayPal decide to go that route.

“The establishment of this relationship is a major industry milestone, which will help shape the emerging payments landscape by bringing together an established direct banking and payments company with a leading commerce enabler to create an alternative payments option for consumers at the point of sale,” said Diane Offereins, President of Discover Payment Services in a statement.

Click here to read more from GigaOm.