Digital Transactions Authoritative, insightful and timely information for payments professionals
By Peter Lucas
PayPal Inc. on Tuesday took more steps toward strengthening its in-store presence, and at the same time broadened the reach of its Bill Me Later lending service to consumers carrying private-label cards. Both arrangements are the result of an agreement with Alliance Data Systems Corp., a big third-party private-label and cobranded credit card processor and provider of loyalty and marketing services. Separately, PayPal struck a deal with wire-transfer provider MoneyGram International Inc. that opens thousands of cash-access locations to PayPal accountholders.
As part of their two-pronged deal, Plano, Texas-based Alliance Data will offer PayPal acceptance to merchants enrolled in its card programs through its Alliance Data Retail Services subsidiary. Additionally, Alliance Data cardholders will be able to add their Alliance-issued private-label or cobranded cards to their PayPal wallet and use them at PayPal merchants that accept those cards when making an online purchase.
Alliance operates 120 card private-label and cobranded Visa and MasterCard card programs for about 110 merchants, and has 30 million cardholders. The majority of its card programs are private label.
“This agreement helps create an entrée for PayPal in our retailers’ stores, while giving our cardholders more choices for how they want to pay,” Brian Billingsley, director of strategic business development for Alliance Data, tells Digital Transactions News. “It’s a convenience play.”
The Alliance Data deals builds on efforts by PayPal to become accepted at the point of sale. The eBay Inc. subsidiary is working directly with large chains such as The Home Depot and with Discover Financial Services via the card network’s merchant acquirers to reach small and mid-sized merchants.
San Jose, Calif.-based PayPal declined to make an executive available for an interview. In a press release announcing the deal, Don Kingsborough, PayPal’s vice president of retail services, said: “Offering our mutual retail clients the convenience and security of PayPal allows them to reinforce their relationships with consumers and will help them sell more.”
The second part of the deal calls for Alliance Data to offer Bill Me Later as a payment option to its 30 million cardholders. Initially, one potential target audience within its portfolio is the inactive cardholders who shop online. Under the terms of the deal, Alliance Data will hold a minority portion of the Bill Me Later receivables generated by its customers that use the transaction-based service, according to Billingsley. “This is strictly a cardless play,” he adds.
Meanwhile, PayPal’s new agreement with MoneyGram will allow its 55 million accountholders to transfer money from their accounts and receive the funds in cash at about 5,000 MoneyGram locations in Dallas, New York and San Francisco. The deal will expand by the end of the year to allow PayPal accountholders to load funds to their accounts through MoneyGram offices. MoneyGram operates more than 40,000 locations.
“There are a lot of small eBay sellers and merchants that have PayPal accounts that want to get funds out in cash and this is a way for us to help facilitate it,” says Tim Summers, head of emerging channels for Dallas-based MoneyGram. “It’s a natural extension of our business.”
The forthcoming ability to load cash funds directly to PayPal accounts through MoneyGram offices is likely to appeal to unbanked and under-banked consumers who lack a credit or debit card to open and fund a PayPay account, according to Summers.
In the press release announcing the deal, Mark Lavelle, senior vice president of strategy and business development at PayPal, said: “This new service will provide an even greater level of flexibility, convenience and value to existing PayPal users.”
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