The Morning Ledger reported on the arrangement between Visa and PayPal as announced at PayPal’s quarterly earnings call. Here are some of the points:
Visa and PayPal have had an on-going tiff because PayPal has been encouraging its customers to fund their PayPal card through their checking account using and ACH transaction, not a credit card. Even in consideration of fraud losses, ACH is typically less expensive than a card transaction. In their agreement, PayPal said they would stop doing that and in turn, Visa gave them a long term pricing deal so PayPal could have some certainty around their costs.
But wait, there’s more to this deal:
PayPal Visa Inc partnership would also allow PayPal users to withdraw cash – using a Visa debit card – from their accounts without having to wait for hours or days for it to be processed.
In return, Visa will co-opt PayPal into its tap-and-pay feature at certain retail locations. The tap-and-pay feature allows shoppers to just wave their card or mobile phone over a reader machine to be able to pay.
This last point means that Visa, through the issuers PayPal works with will provide access to tokenization services, further cementing Visa dominant role in payment transaction security.
Overview by Sarah Grotta, Director, Debit Advisory Service at Mercator Advisory Group
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