Starting next year, PayPal users will be able to use their online payment accounts to shop in more than 7 million physical stores nationwide, because of a new partnership between owner Ebay Inc. and credit card company Discover Financial Services.
PayPal will begin issuing cards in the second quarter of 2013 that are hooked into the accounts of the service’s more than 50 million active users. Customers can then make purchases from merchants connected to Discover’s network, using PayPal as they would cash, checks and credit cards.
Investors cheered the move, pushing Ebay’s stock up as much as 4.8% to $48.08 a share during Wednesday trading. Discover stock jumped more than 5.7% to $39.13 a share – an all-time high for the company.
The new partners are venturing into increasingly crowded territory. Evolving payment methods have attracted mobile system Square – which recently paired up with coffee giant Starbucks – as well as Google Wallet, Wal-Mart and more.
Teaming up with Discover was an extension of PayPal’s existing strategy. The payment system is already accepted at thousands of store locations owned by more than a dozen 16 national retailers, including Abercrombie & Fitch, Barnes & Noble, Jamba Juice and more.
PayPal first tested its in-store service with Home Depot Inc. through a system that involved customers typing a phone number and PIN number into pay stations. The cards issued through the Discover deal will expand the program’s reach to businesses without typing-equipped terminals.
“The important thing in this deal is to integrate in the life of the consumer,” said Don Kingsborough, vice president of PayPal’s retail and prepaid sector, in a conference call with analysts. “You have to be wherever the consumer wants to shop. That’s what gets adoption.”
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