Discover Financial Services and PayPal have inked a new agreement that will make it easier for PayPal users to use their Discover cards to pay securely at contactless in-store checkout terminals, and enable Discover card members to use their Cashback Bonus through PayPal at e-commerce sites that accept the digital payment solution.
The companies said Discover cards will be presented as a clear payment option within the PayPal wallet, while giving PayPal access to Discover’s tokenization services, allowing the digital wallet to be used at all contactless-enabled merchants that accept Discover. Discover cardmembers also will be able to view and use their available Cashback Bonus while using PayPal to fund all or part of a purchase at PayPal’s list of online and mobile merchants.
"U.S. consumers have nearly $50 billion in rewards value, offering PayPal an enormous opportunity to unlock the value of these rewards by giving customers easier ways to access them in their PayPal wallet and use them when they shop with PayPal’s 15 million merchant accounts around the world," PayPal COO Bill Ready said on the company's blog.
PayPal has spent the last year forging stronger ties with the traditional payment card companies, creating new partnerships with Visa, MasterCard, Citigroup and Fidelity National Information Services. This new agreement certainly fits in with that trend as PayPal is seeking to become a more viable and secure in-store contactless payment option via Discover. Payment companies are increasingly turning to tokenization services that encrypt payment credential to add another layer of security to transactions.
However, it’s not the first time Discover and PayPal have aligned. In 2012, they joined in what was then one of PayPal’s first in-store payment partnerships with one of the major card companies. This is a separate agreement, but their history together suggests the companies don't have a contentious relationship — something PayPal investors have tended to worry about in relation to the traditional payments players.
Meanwhile, the "nearly $50 million" number Ready mentions actually comes from a more than five-year-old study, the 2011 Colloquy Loyalty Census. We’re going to go out on a limb, and guess the number will be more than a bit higher in 2017. (As recently as 2015, Colloquy reported that U.S. consumers held more than 3.3 billion memberships in various loyalty programs, a figure that had grown 26% from the previous year.)
In any case, getting more options for ways to use their Cashback Bonuses is only going to make Discover cardholders feel more satisfied with Discover.