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Discover Financial Services on Tuesday named six prominent merchant acquirers among 50 committed to helping the network bring acceptance of leading online payment system PayPal to more than 2 million physical merchant locations by year’s end. But a notable missing link is No. 1 merchant processor First Data Corp., which notified its partner acquirers last week that it will not support PayPal acceptance.
Atlanta-based First Data announced its decision in an April 23 client bulletin but gave little explanation why. “For a variety of factors and after evaluation of the PayPal product offering, First Data has decided not to implement support for this new card product,” says the bulletin, a copy of which was obtained by Digital Transactions News.
The bulletin says the processor will block cards in the BIN (bank identification number) ranges of 60110400 to 60110499. Those would be the Discover-issued cards that Discover and PayPal announced last August that they planned to send to about 50 million PayPal account holders to enable them to use their accounts when paying at brick-and-mortar merchants.
A First Data spokesperson declined to go into detail about the decision not to support PayPal acceptance.
“We’re continually working with our network partners to evaluate the value of enabling new payment functionality for our merchant and financial-institution customers and their consumers,” the spokesperson says by e-mail. “I can also tell you that we are in active negotiations with Discover and PayPal, but we currently do not have a contract that allows us to process PayPal transactions in physical stores.”
A PayPal spokesperson could not be reached for comment, but a spokesperson for Riverwoods, Ill.-based Discover held out hopes that whatever issues First Data has can be resolved.
“I can tell you that we are still negotiating with First Data and believe we can come to a mutually beneficial resolution,” the spokesperson says by e-mail. “As we announced earlier today, some of the biggest names in merchant acquiring and processing have already signed on … we expect First Data will want their merchants to reap the same benefits that many of their competitors already enjoy.”
The acquirers the spokesperson referenced are Vantiv Inc., Global Payments Inc., WorldPay U.S., First American Payment Systems L.P., Heartland Payment Systems Inc. and Total System Services Inc. (TSYS). They’re among the 50 that have already brought PayPal acceptance to some 250,000 U.S. locations. “Other leading acquirers and processors continue to join on a regular basis,” says a Discover news release.
Through various ventures and third-party processing agreements with banks and independent sales organizations, First Data services 4 million U.S. merchant locations, half of the country’s 8 million total estimated Visa and MasterCard acceptance locations. An accord with First Data obviously would open up a huge potential merchant market for San Jose, Calif.-based PayPal, a unit of eBay Inc., via Discover.
Discover has recruited more than 100 acquirers to bring acceptance of its own card to near parity with the Visa-MasterCard base. PayPal, meanwhile, has struck accords with a number of large retailers such as The Home Depot Inc. for direct acceptance of PayPal, but paired up with Discover, via its acquirers, to potentially reach millions of local and regional retailers, restaurants and other card-accepting physical merchants.
A senior executive with an ISO who asked not to be named suggests that First Data, which processes for card issuers in addition to merchants, may have dual motivations in refusing PayPal, at least for the time being.
“One is to increase their leverage with PayPal and potentially get more money,” the executive says. “And, they may have gotten pressure from their issuing banks because [PayPal] is a competing platform.”
The executive, however, thinks First Data might eventually reverse course. “Pressure from guys like me and merchants could get them to change,” he says.
Reuters, meanwhile, reported that Wal-Mart Stores Inc., the world’s largest retailer and a First Data merchant-services client, does not plan to take PayPal in its stores. A Wal-Mart spokesperson noted that in the absence of the card, PayPal acceptance at big retailers can involve the account holder inputing a phone number and four-digit PIN. “The added complexity at the point of sale does not justify acceptance of PayPal,” the spokesperson told the news service.
