PayPal unveiled a 12-month exclusive partnership with Visa, which is expected to expand PayPal’s point-of-sale acceptance and give consumers more payment options.
As a result of the joint venture, new Paypal accounts will have Visa as a payment option not just their linked bank accounts or Paypal balance.
“PayPal will share transaction data with the card network for any purchases made with a Visa card,” said Monica Eaton-Cardone, a risk management expert and chief investment officer of Global Risk Technologies in Clearwater, Florida. “PayPal will be able to utilize Visa’s near-field communication technology with brick-and-mortar merchants as well as receive certain undisclosed economic incentives.”
The downside is that Visa-linked PayPal accounts can lead consumers to start charging more purchases because it’s easier, opening the door to friendly fraud.
“Consumers enticed to over-spend out of convenience are more likely to file charge backs,” Eaton-Carone told Newsmax Finance. “With the majority of these claims unfounded for friendly fraud, the merchant faces increasing costs and liabilities.”
Historically, PayPal’s policies and operations have put them in Visa’s foe category.
“An agreement between these two companies is wholly unexpected,” said Eaton-Cardone.
PayPal-owned payments app Venmo processed nearly $4 billion during the second quarter, which is a 141% increase in usage.
“There is new potential for real-time payments not only for people-to-people, but also people-to-businesses,” Eaton-Cardone said.
Originally, PayPal claimed it incentivized users to fund their PayPal digital wallets with their bank accounts through Automated Clearing House (ACH) instead of payment cards in an effort to cut down on fees and costs. ACH is an electronic transfer network for financial transactions in the United States that include direct deposit, payroll and vendor payments.
“The deal allegedly ensures Visa won’t charge increased processing fees,” said Eaton Cardone.
Visa stands to increase earning potential substantially because some 50% of PayPal wallets have been funded with ACH and the Visa card network will now capture a percentage of that Paypal activity.
“It will be interesting to see how this new partnership impacts mobile commerce as both entities likely have motives that haven’t been revealed yet,” said Eaton-Cardone.
Juliette Fairley is an author, lecturer and TV host based in New York. To read more of her work, Click Here Now.
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