Mercator Perspectives

NetSpend Partners with PayPal and Potentially Opens Up Whole New Markets

The Austin American Statement reported last week that NetSpend has signed a contract with PayPal to be a program manager, distribution manager, and processor of a PayPal prepaid card. (Read the full story at: NetSpend was vague about what its agreement with PayPal actually entails, but said the partnership would launch next year.

While it is pure speculation at this point, their agreement could help NetSpend build an up-market business and compete with Green Dot and American Express in competing for broader swaths of the market. PayPal customers seeking a way to manage their money off line in a manner similar to how they manage their online spending may take to the prepaid card as a spending option.

PayPal users are accustomed to setting aside money for purchases, even if it is not specified what they plan to buy. They know they want to hold money aside in an accessible reserve. Prepaid cars allow them to do the same thing and use those funds in a brick and mortar environment.

The brand recognition and trust of PayPal itself cannot be ignored either. The PayPal brand could convince people who might otherwise rely on debit or credit cards to use prepaid for the first time. If the potential cardholder is paid for work or goods via PayPal, the card may become a low-cost, low-friction way to access funds. Depending on what incentives PayPal and NetSpend provide, PayPal customers could be steered away from traditional credit and debit cards toward a PayPal product that makes the company nearly as ubiquitous in the offline world as it is in the online one.

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