PayPal and Visa tie in for European debit cards
(18 July 2017 – Europe) PayPal has partnered with Visa in a deal that will enable it to issue debit cards in Europe, as the online payments service company further encroaches into traditional retail banking.
The two companies have signed an agreement to collaborate in offering payments services across the continent, assuaging a longstanding competitive tension.
Card companies have come under pressure from the rise of PayPal, whose users are able to make payments directly from bank accounts, bypassing the card network.
As part of the deal, PayPal, which already has a banking licence in Europe, will be able to offer PayPal-branded Visa debit cards.
The move is expected to appeal in particular to small businesses that carry balances in their PayPal account for buying supplies, or for people who do not have a bank account but use PayPal.
Until now, PayPal has used its banking licence largely for treasury functions. The deal with Visa opens up a broader customer base as the company shifts towards retail banking.
Jim Magats, head of payments, product and engineering at PayPal, said that although there was no immediate goal to launch a debit card, planning was under way.
PayPal already offers pre-paid cards with MasterCard in some countries, such as Italy. It also offers debit cards in the US. The move would mark a first in Europe.
Mr Magats said that PayPal had several merchant customers that would prefer to use PayPal rather than a bank account for day-to-day spending, and customers who conducted all their online transactions via PayPal who wanted to extend this to card spending.
The deal with Visa will give PayPal users access to Visa’s contactless payment points in retailers and shops across Europe, providing PayPal with access to in-store retail transactions. It also means that customers would be able to use their phone to “tap and pay” in a shop, for example, through their PayPal account.
The development is a boost for PayPal, which has traditionally operated online as a payments service, by deepening its foothold in the world of in-store commerce.
For Visa, the deal makes it easier for PayPal customers to pay with their Visa card online or in a mobile app.
Magats said that PayPal had “historically created friction for a customer to get to their Visa card if they had a balance or a bank account . . . we will create an equal environment for someone to get to their Visa account”.
The move should mean that Visa sees more card transactions going through PayPal. In return, Visa will pay “economic incentives”.
Bill Gajda, head of innovation and strategic partnerships at Visa, said: “PayPal is a really important piece of our broader strategy in enabling digital payments.”
The agreement is an extension of a tie-up between the companies in the US and Asia-Pacific last year. Magats added that the partnership was likely to be “the first of many” in Europe.
In the UK, credit and debit card surcharging fees will be banned from 2018, as the Government has announced that paying by card will be free for consumers.