In order to enhance its mobile payment platform, e-commerce
) has signed a deal with Discover Financial Services, thus
extending PayPal's services to 7 million merchants next year.
Following the news, eBay shares were up 2.51% to $47.00 by the end
of day yesterday.
Discover is the fourth-largest U.S. credit card issuer after Visa
Inc, MasterCard Inc and American Express Co.
Under the partnership, PayPal will utilize Discover's credit card
network to enable PayPal users to make payments at retail stores
starting from April 2013. Discover will integrate PayPal's payment
system into its software, which will be uploaded to millions of
point-of-sale (POS) terminals that support Discover Card payments.
PayPal users will now be able to pay by just swiping their new
cards through existing check-out machines and entering a four-digit
PIN. According to Don Kingsborough, a PayPal executive, merchants
will not need to buy any new hardware or software to accept
payments through PayPal.
PayPal, which accounts for almost half of eBay's annual revenue is
expanding beyond its online payments service and finding new ways
to get a foothold in the offline world. Last year, the company
expanded its offline partnerships and announced that PayPal point
of sale was gaining traction as 15 national retailers, including
Home Depot Inc and
Office Depot Inc
) had agreed to accept PayPal as a payment mode.
We believe that this deal will greatly accelerate PayPal's in-store
payment efforts. By using Discover's network, PayPal can increase
its addressable market, without requiring any significant
integration work by merchants. This puts PayPal in a better
competitive position against rival mobile payment systems such as
Google Wallet, Isis, Square and others.
Aided by growth in its PayPal business and mobile commerce, eBay
recorded a strong quarter with both revenues of $3.40 billion and
earnings of 51 cents exceeding expectations. eBay's PayPal remained
the star performer, generating total payment volume (TPV) growth of
1.8% and 19.9%, respectively from the previous and year-ago
We believe that eBay is taking all the necessary measures for
continued growth in mobile payment in the near future. Both
Payments and Marketplaces are showing improving trends compared
with the year-ago quarter, indicating its changing business
Though eBay's payment business shows great promise, competition may
be expected to pick up as banks and other companies announce their
own payment systems and
) digital wallet gathers steam.
Currently, eBay shares carry a Zacks #3 Rank, indicating a
short-term Hold rating.
EBAY INC (EBAY): Free Stock Analysis Report
GOOGLE INC-CL A (GOOG): Free Stock Analysis
OFFICE DEPOT (ODP): Free Stock Analysis Report
To read this article on Zacks.com click here.