PayPal Wants to Be Your Financial-Services Everything

Already a presence in some 30-plus retailers today, alt-payment service provider PayPal is preparing to launch a major expansion of its on-premise checkout service through a partnership with Alliance Data Systems (NYSE: ADS  ) as well as its Bill Me Later lending service through private-label credit cards issued by Alliance's partners.

Not that MasterCard (NYSE: MA  ) and Visa (NYSE: V  ) are about to lose their stranglehold on the global payments markets anytime soon -- Visa owns about half the market while MasterCard commands another third -- the eBay (NASDAQ: EBAY  ) subsidiary is taking advantage of the growing interest in and proliferation of digital payment services. Heck, even the two industry heavyweights have gotten in on the act with their MasterPass and V.me services.

Then again, it may be it's feeling the hot breath of the competition on its neck so that it needed to act now, act fast, to broaden its presence quickly. Not only are the payment processors going digital, but new upstarts like Square have entered the market and there's still the palpable threat of the near-field communications in the mobile wallet.

eBay's payments segment, which includes PayPal, Bill Me Later, and Zong -- its direct biller via mobile phone division that it acquired in 2011 -- saw net revenues grow 20% last quarter over the year-ago period primarily on the strength of Bill Me Later.

Where the new PayPal agreement may have an advantage over its rivals is the multiprong attack it is taking. Square, for example, while not charging a per-transaction fee like others,  also only allows merchants to accept credit cards (which might be why Visa took a stake in the service). PayPal is offering consumers and merchants a broad option of ways to pay, whether it's through checking account-linked PayPal, the lending service Bill Me Later, or now through affiliate credit cards that will be associated with PayPal.

The mobile wallet solution is still in its infancy, though Berg Insight thinks it will turn into a $35 billion industry by 2017. The greatest drivers of growth could be Google's own Wallet, Isis -- the consortium put together by Verizon, AT&T, and T-Mobile -- and Merchant Customer Exchange, or MCX, that cobbles together Wal-Mart, Target, and a dozen or so other retailers into a partnership to ensure they're not left out of the mobile wallet initiative. 

In short, there is no shortage of options to pay for goods and services (whatever happened to simply paying cash?). And while there are a number of bigger, better financed rivals in the field, PayPal, as a well-known and trusted player, can still make its mark here. Add in a separate agreement with MoneyGram International (NASDAQ: MGI  ) to transfer money from PayPal accounts or receive the funds in cash at some 5,000 MoneyGram locations -- a program that should be expanded to all 40,000 storefronts by the end of the year -- and PayPal could soon become a one-stop shop for all of your financial services needs.

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  • Report this Comment On August 08, 2013, at 12:47 PM, NobodysFool2011 wrote:

    Paypal is an unregulated payment intermediary. They are not a bank, they are not regulated to act as such. They do not issue their own lines of credit, they use other companies to do so. How on earth can an unregulated money payment intermediary become your "everything" financial service.

    High time the FTC steps in and puts a clamp on Paypal for trying to operate in financial services without proper regulation.

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