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PayPal ties up with Visa for offline payments in the US

PayPal

PayPal reported a 15% revenue growth to $2.65 billion for the quarter ended June 30 (Q2 2016). The company ended the quarter with more than 188 million active accounts and processed 1.4 billion transactions. Total payment volume processed was $86 billion, up 28% year-on-year.

PayPal also announced that it is getting into offline payments through a partnership with card network Visa. Through this partnership, PayPal’s digital wallet will be accepted in all physical retail locations where Visa contactless transactions are enabled. In addition, PayPal will gain access to Visa’s tokenization services, in the United States, for in-store PayPal transactions.

VentureBeat points out that PayPal had been urging customers in the US to use Automated Clearing House (ACH), a network which processes net banking, to load money into their wallet. Visa’s chief executive Charlie Scharf said at a conference that he wants PayPal to stop telling its users to fund their digital wallets through bank accounts. If it continued,  Visa would “compete with them in ways that people have never seen before.”

Through this deal, the two companies seemed to have arrived at a truce. The agreement gives PayPal certain economic incentives, including incentives for increased Visa volume, and greater long-term certainty on fees paid to Visa, and removes the threat of any fees or Visa network rules being targeted solely at PayPal.

It’s worth noting that in India, State Bank of India, the largest bank in the country, has removed net banking as an option to load money in wallets due to increased cases of fraud in the country. More on that here.

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Other highlights from the earnings

– Venmo transactions: . In the quarter, peer-to-peer payments app Venmo processed around $4 billion in P2P payments, an increase of 141% year over year. PayPal acquired Chicago-based payments gateway Braintree, in an all-cash deal worth $800 million, back in September 2013. It’s worth noting that Braintree-owned  Venmo was one of the primary reasons the company had acquired the company.

– Increase in delinquencies: During the quarter, PayPal said that experienced a higher percentage of write offs on credit balances. It increased to 6.3% from 6.1% in the preceding quarter. It has a product which offers credit to buyers to complete a purchase and pay later. This represents about 2% of the company’s total payment volume processed. John Rainey, PayPal’s CFO, said that this was due to changes in repayment options for credit. “We changed some of the ways that both we contacted customers as well as the repayment options for credit. That had some effect that on the late-stage delinquencies. There are other methods that we can do to mitigate that impact and we’re going ourselves with those options for the back half of the year,” he added.

– Contextual payments and Pinterest: PayPal said that it is continuing to focus on contextual payments. “Braintree powers 80% of the Pinterest launch merchants. Building on this infrastructure, we are now powering Pinterest’s new shopping bag functionality that lets shoppers pick items from across the web, collect them in a shopping cart, and make a single purchase,” Daniel Schulman, CEO, added in the call.

Download: Press release | Transcript

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