How PayPal is moving into retail payments

PayPal finally has what it has wanted for almost a decade: to expand its user base beyond e-commerce. A partnership with Google announced Tuesday allows Android users to add their PayPal accounts to their mobile wallets, giving them the ability to spend from their PayPal balances with the tap of a phone. PayPal is extending its reach while Google now has access to PayPal’s nearly 200 million active accounts. “PayPal has been granted its first real opportunity to play a role in brick and mortar commerce,” Jordan McKee, an analyst at 451 research, wrote in a client briefing shared with Tearsheet. “The collaboration offers PayPal the prospect of extracting net-new payment volumes from a channel it has lacked exposure to, while potentially opening up Android Pay to millions of new users.” The partnership means customers can pay with PayPal wherever they can pay with Android Pay – that includes major retailers like Walgreens and Dunkin’ Donuts. The big problem remains how it will compete against Apple Pay, which is poised to maintain its dominance in the mobile payments market by hitting 86 million users this year, according to forecasts by research firm Juniper. By contrast, Android Pay ended 2016 with 12 million users. But PayPal probably isn't even trying to compete Apple’s mobile payments product, according to David True, a partner at PayGility Advisors. PayPal’s goal is to give its users as many payment options as it can and would probably strike similar deals with Apple Pay, Samsung Pay and other payments platforms if it could.

PayPal declined to comment on the potential for future mobile payments partnerships. “We are focused on testing various [near field communication] experiences on mobile devices right now and we value the existing partnerships we have with a number of our global technology partners,” said Grace Nasri, PayPal’s communications manager for global product and partnerships. PayPal and Google have an existing working relationship; PayPal’s Braintree platform enables Android Pay and PayPal has been a payment method for Google's Play app and digital content store for nearly three years. If anything, the agreement underscores the competition between Android Pay and Samsung Pay, given they compete directly with each other for users on the same operating system. Neither of them are truly interested in the payment part either, True said, but rather what it helps them achieve: sales of mobile phones and other connected devices (which has historically been Samsung’s modus operandi). However, Android Pay through its recent partnerships has “wisely acknowledging that collaboration is the basis of broadening wallet value for users and stakeholders alike,” McKee said. Last week it announced partnerships with Bank of America, USAA, Bank of New Zealand, Discover, and mBank to integrate the Pay service into their apps – providing direct access to new users while giving more control to issuers over mobile wallet onboarding. “At core, the issue in the U.S. is what is always has been: paying with plastic cards works well, pretty much every time, so there’s little reason to change that habit,” True said. “It is a long game, and the real mobile payment future is where one doesn’t need a physical point of sale.”