Discover and PayPal have reached a deal that will expand PayPal’s POS presence while making Discover a more visible payment option within the PayPal mobile wallet. Under terms of the pact, PayPal will gain access to Discover’s tokenization services, enabling U.S. PayPal customers to use their Discover cards within the PayPal wallet app to make contactless purchases at contactless-enabled merchants that accept Discover. In return, Discover cards will be presented as a “clear payment option” within the PayPal wallet, the companies said. The deal also enables PayPal customers with eligible Discover cards to view and use their Cashback Bonus loyalty points within PayPal to fund all or part of a purchase.
The deal with Discover is PayPal’s latest move to expand its presence into brick-and-mortar retail and maintain a position at the center of its customers’ shopping experiences—even if it means foregoing some transaction fee revenue. PayPal last year reached similar acceptance deals with Mastercard and Visa, agreeing to present those networks’ cards as payment options within the PayPal app and cease steering customers toward funding PayPal purchases via ACH transfer. In exchange, PayPal gained access to the networks’ tokenization services and POS rails. And in December, PayPal announced deals with Citi and FIS to enable its customers to pay with bank-issued cards and accounts within the PayPal app for in-store and mobile purchases.
For Discover, integrating with PayPal gives the network another significant foothold in the mobile payments ecosystem—and enables it to compete with Mastercard and Visa within the PayPal app. “This agreement with PayPal helps expand consumer payment choices by providing additional ways to transact, and builds on the growing adoption of digital payments,” said Diane Offereins, president of payment services, Discover.
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