Who Gains in the PayPal and Visa Partnership?
PayPal and Visa Inc. have announced their new partnership. The new deal promises to expand PayPal’s offline reach. Both parties to the agreement stand to gain, but I think this agreement gives a little more advantage to PayPal.
PayPal users will no longer be steered away from linking accounts to Visa credit cards in preference of bank accounts.
Users can seamlessly leverage Visa Digital Enablement Program (VDEP) for making payment in retail stores using their smartphones.
Who Gets an Upper Hand in the PayPal and Visa Deal?
The integration of PayPal with VDEP technology will make it easier for customers to make purchases online through PayPal on their smartphones. With the new partnership, PayPal can steer toward expansion in physical stores, extending its dominance.
PayPal has been making efforts to enter the physical payments space for quite some time. This partnership gives the payment processing company all reasons to smile, since it has an opportunity to enter the physical space through smartphones.
On the other hand, this deal will help Visa expand its reach.
Prior to the agreement, PayPal would encourage payment transactions from bank accounts through the Automated Clearing House system (ACH). The ACH processes large volumes of transactions for financial institutions outside of card networks, costing just a few cents. This helps PayPal make huge savings, as opposed to credit card payments.
However, after the latest agreement, PayPal has started giving equal importance to both options for its users.
Prior to the PayPal and Visa deal, PayPal required users to enter bank account details, steering them to use ACH. This meant that the transactions would run through ACH, saving users time that was otherwise lost in entering card information.
What’s in it for Visa?
PayPal’s literally steering users to use ACH was a loss for Visa. The process literally cut out Visa from the transaction volume processed through PayPal. The new PayPal and Visa model could benefit Visa with more transactions; however, it remains to be seen if PayPal will register any increase in transaction volume.
Now customers can get more details for every single PayPal transaction. This means merchant’s name will be listed on transactions once labeled as “PayPal” on a customer’s card statement. As a result, the number of enquires and queries to PayPal in the form of customer service emails and calls, are expected to come down.
Related: PayPal in Retail?
It’s Now Really PayPal Everywhere.
PayPal users can now expect to have more payment options in offline stores. The deal makes it possible for users to pay with PayPal using Visa online.
The deal will give PayPal access to the Visa Direct network, so there is a quick transfer of money between different Visa cards and also between PayPal and Venmo – the peer-to-peer digital wallet from PayPal.
Additionally, PayPal users can seamlessly and securely transfer funds from Visa cards to their PayPal accounts.
Now e-retailers must accept PayPal One Touch, since it has become easier for customers to reload their PayPal accounts with Visa Direct. A PayPal user can leverage the mobile payments feature, One Touch, to complete a transaction on their linked smartphone with one click.
The deal will certainly help PayPal compete more vigorously offline and offer a good competition to Apple Pay.
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