EBAY eBay Inc

PayPal Holdings Inc. has struck another deal with a payments network, this time MasterCard Inc., as it seeks to carve out a foothold in stores, according to the company.

This follows its big deal with Visa Inc. earlier this year. The two deals in quick succession are among the biggest moves so far in the online-payments pioneer's post-independence strategy after splitting off from eBay Inc. last year.

The aim is to end bitter fights with the big card issuers and make PayPal a universally accepted method of payment. This would include in stores at the checkout counter, with MasterCard and Visa's mobile-tap tools, the big new frontier for payments companies.

But some analysts have argued that this comes at the expense of profitability in the short term. The moves shift PayPal away from promoting free bank transfers to fund customers' transactions and toward the networks, which charge a fee.

There is also fierce competition from tech firms such as Apple Inc., and young payments providers such as Stripe Inc., to win over merchants and consumers in big numbers in the mobile and one-click online payments realms.

PayPal's stock tumbled as much as 9% after the Visa deal was announced in July, putting the company on the defensive about its strategy. Its shares are still down 8% from the highest close that month, though overall they remain up 7% from the company's debut in July 2015.

The company has said the network deals, which will see PayPal place debit and credit cards on par with other ways to pay, make PayPal a "ubiquitous" payment tool. It argues that volume growth would outpace declines in revenue per transaction, and that merchants would want to pay for PayPal because it works seamlessly for every customer.

The deals would also help its relatively newer services, such as Braintree, which processes payments for big merchants, and Venmo, a social peer-to-peer payments app popular with millennials.

"Customer choice and partnership are fundamental principles for PayPal," Chief Executive Dan Schulman said in a statement. "With each partnership agreement that we sign, we further expand the ubiquity and value of the PayPal brand and improve our own economics."

The company is in discussions with banks that issue cards to potentially create new products and promote PayPal via those partnerships, people familiar with the talks said.

Those deals could be crucial as well. Apple already offers a mobile wallet and will soon be rolling out an online payment tool, PayPal's bread-and-butter. Big banks are also preparing to roll out their new Venmo competitor app, set to be called Zelle.

The terms of the MasterCard deal have PayPal enabling users to set the credit or debit card as a default payment method. PayPal will also share data on any transactions that use the MasterCard mobile tap.

"Whether paying in the physical or digital world, consumers want to see the familiar MasterCard brand," said MasterCard CEO Ajay Banga in a statement.

In exchange, MasterCard will drop the digital wallet fee it charges PayPal. It will also give PayPal volume discounts, as Visa did.

MasterCard will further enable PayPal's Braintree to offer Masterpass, a one-click online checkout tool, and enable Venmo users to make instant transfers via MasterCard Send, rather than waiting up to three days to get money into their bank accounts. That in particular is key to competing with banks' real-time payments apps.

Write to Telis Demos at telis.demos@wsj.com

(END) Dow Jones Newswires

September 06, 2016 07:15 ET (11:15 GMT)

eBay (NASDAQ:EBAY)
Historical Stock Chart
From Mar 2024 to Apr 2024

eBay (NASDAQ:EBAY)
Historical Stock Chart
From Apr 2023 to Apr 2024