MasterCard and PayPal mull strategic alliance
Ajay Banga, president and CEO, MasterCard
Years of friction could be over as PayPal is talking to MasterCard on a potential strategic alliance, according to the Financial Times.
PayPal, with its network of 188 million active users, has been expanding at MasterCard’s and Visa’s expense. One example was its recent partnership with Mexican telecommunications giant América Móvil for growth in Latin America. PayPal’s payments processed also increased 28% in the most recent quarter to $86 billion.
Ajaypal Banga, MasterCard’s chief executive, says it is holding a “constructive dialogue” with PayPal.
“PayPal is actually working to resolve some of those concerns we all have,” he told Wall Street analysts. “This is actually a good thing for PayPal and for the industry because at the end of the day, providing consumers the ability of having seamless, simple ways of paying is good for all of us.”
In fact, on 27 July, MasterCard and PayPal announced a multi-year extension of the PayPal Extras MasterCard co-branded consumer credit card program in the US and Puerto Rico.
While PayPal is chatting to MasterCard, it did strike a deal with Visa a week ago. This was to “accelerate the adoption” of digital payments for consumers and merchants.
The Financial Times says: “Under PayPal’s arrangement with Visa, the online payments company will stop encouraging its customers to link to bank accounts.
“In return, the online payments specialist gains a boost to its physical presence, giving it access to Visa’s contactless payment points in US retail stores. Visa will also sweeten the deal by paying PayPal a fee based on the volume of payments that PayPal steers towards Visa.”
Martina Hund-Mejean, MasterCard’s CFO, says: “Everybody needs to remember that we were the first network, actually, to tell them … that the way that they’re doing the PayPal wallet is not good for the ecosystem.”
“Both parties have to be happy and we’ll announce when we can announce.”
House of cards
Not surprisingly, there is news on both MasterCard and Visa to add.
MasterCard entered into a definitive agreement to acquire 92.4% of VocaLink for $920 million. MasterCard says this acquisition accelerates its efforts to be an “active participant” in all types of electronic payments and payment. It will also allow it to “play a more strategic role in the UK payments ecosystem”.
Over in China, the country said it will let foreign payment card firms operate in the country under rules issued on 7 June. The announcement gives Visa and MasterCard the opportunity to tap into a CNY 55 trillion ($8.4 trillion) card payment market.
As a result of that ruling, MasterCard announced plans in July to become a payment service provider in China. It is still pondering whether to do so alone or with a partner.
