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Visa, PayPal consolidate audiences to streamline mobile payments, enhance security

Visa and PayPal have thrown a twist into the race for mobile payments domination by entering into a strategic partnership that will broaden consumers’ ability to pay via PayPal and Venmo and improve security, indicating the importance of collaborations in this competitive space.

Visa and PayPal’s new partnership bodes particularly well for mobile-savvy consumers, most of whom prefer having a wide range of choices when it comes to selecting a digital payments service. The collaboration will enable individuals to more easily use their Visa cards within the PayPal and Venmo digital wallets and require PayPal to relinquish more transactional data to credit card companies.

“With PayPal and Visa entering into a partnership to extend consumers’ choices when it comes to payments, which inevitably helps further the digital payment path, both companies working together is helpful for consumers that were using these two payment options separately across different platforms,” said Marci Troutman, CEO of SiteMinis.

“Integration of payment systems to give consumers better comfort in the adoption of digital payments helps not only the banking brands, but also their consumers on many levels.”

Mobile payments’ new path
The companies’ U.S. partnership was developed in a bid to streamline current mobile payments experiences and offer consumers more choices in how they use Venmo and PayPal.

PayPal now makes it simpler for existing and new users to pay with their Visa cards, since the option will be highlighted during enrollment and subsequent payment checkpoints. Consumers can also set their Visa cards as the preferred method of payment when using PayPal.

Additionally, PayPal will not recommend Visa customers to link to bank accounts via ACH, as the digital wallet service will work with issuers to locate individuals choosing to migrate ACH payment flows over to their Visa credit or debit cards.

The partnership also dictates that PayPal will expand its point-of-sale acceptance by joining Visa’s Digital Enablement Program, thereby allowing the platform to access token services and boost transaction security.

PayPal’s digital wallet will expand acceptance capabilities to all bricks-and-mortar retail locations where NFC-enabled Visa transactions are enabled.

Furthermore, consumers will enjoy greater flexibility in withdrawing and transferring funds from their Venmo and PayPal accounts to their bank accounts through the Visa Direct service.

An unstoppable duo?
PayPal and Visa’s new partnership offers strong implications for the competitive mobile payments sector, suggesting that other platforms may opt to team up in a bid to take major players such as Apple Pay head on.

“These types of collaborations could become more commonplace in the mobile payments sector as the adoption rate of digital payments for consumers climbs well past the 20 percent mark,” Ms. Troutman said. “Whether or not all digital payment options migrate to collaborating for one easy platform for all consumers is to be seen, as long as the threat of a monopoly doesn’t hinder the process.”

PayPal has grown since being spun off from eBay and continues to push ahead in mobile, but its ability to remain competitive with Apple Pay and other stalwarts in the space has been unclear so far (see story).

As a result of the collaboration with Visa, PayPal will receive various economic incentives for increased volume and long-term Visa fee guarantees.

In turn, the digital wallet will offer data regarding Visa-funded transactions to issuers and cardholders. This will result in less cardholder confusion, reduced costs and proper application of rewards.

Visa has been heavily innovating within the mobile space as well, likely in an attempt to one-up competitors that are constantly rolling out updates to their existing apps or platforms.

Visa recently strengthened its stronghold on mobile payments with the introduction of the Digital Commerce platform, which offers financial institutions such as Webster Bank and PNC Bank the ability to roll out their own consumer-facing apps (see story).

However, despite the undeniable consumer-facing benefits stemming from Visa and PayPal’s partnership, some experts remain unconvinced regarding its longevity and influence potential.

“Years after mobile payments were supposed to be ubiquitous, we are still regularly seeing these types of announcements that are supposed to make it easier for consumers and merchants,” said Jeff Hasen, founder of Gotta Mobilize and author of The Art of Mobile Persuasion. “But the disparate partnerships keep the effort fragmented and lacking the major drive needed to really move the ball.

“If, as the hype says, that cash will be gone by Tuesday, I’ll suggest it won’t be any Tuesday for the foreseeable future. If ever.”