After reaching deals earlier this year with Mastercard and Visa to stop steering users away from paying with cards in favor of ACH, PayPal Inc. has struck pacts with Citi and FIS that will enable U.S. consumers to pay with bank-issued cards and accounts within the PayPal app for in-store and mobile purchases. The new partnerships are the latest sign that PayPal is willing to open its wallet to outside parties, giving up some transaction fees in exchange for offering its customer more choice and, in turn, driving increased spend and remaining at the center of the payments process.
Under terms of the deal with Citi, the bank will tokenize its Mastercard– and Visa-branded cards for use within PayPal for in-store, online and mobile purchases starting in 2017, marking the first time a major global bank has agreed to do so through PayPal, according to Citi. Meanwhile, the FIS agreement will enable FIS’s client financial institutions to embed their issued cards as payment options in PayPal—which could be a boon for smaller banks seeking to offer their customers mobile payment capabilities that are on equal footing with larger institutions. Avidia Bank and Wintrust Financial are scheduled as the first two FIS clients to debut in PayPal, launching the integration in the first quarter of 2017, FIS said. Card linking will open to all FIS clients by the middle of next year.
For PayPal, offering easy payment card integration is a step toward the company’s goal of uniting the payment experience across channels—with PayPal continuing to occupy a major role in the transaction, notes Rick Oglesby, president of AZ Payments Group and a partner at Double Diamond Group. “PayPal clearly is looking to expand on its relevance to become a more general-purpose solution,” Oglesby tells Paybefore. “By combining forces with banks, it can expand its circle of influence and therefore grow per-customer transaction volume.” Citigroup has 143 million customer accounts and FIS provides banking technology to 6,000 U.S. banks.
Banks have much to gain from allying with PayPal, Oglesby adds—especially as they fight for wallet share with other institutions within the emerging mobile commerce ecosystem. “FIs need to be thinking about being top-of-wallet within all of the relevant wallets—and PayPal is an extraordinarily relevant wallet. So it’s less about competing with the wallets, and more about competing within them.” Oglesby says Citi and FIS were “very smart” for getting on board with PayPal now to gain an early advantage on their competitors.
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