PayPal’s made it pretty clear that enabling consumer choice means giving consumers the ability to use their preferred method of payment inside of their PayPal wallet anywhere they’d like to shop — in-store, online and in-app. Its deals earlier this year with Mastercard and Visa underscored its commitment to giving issuers new tools to drive a co-branded experience inside of the payment app.
However, PayPal’s two new partnerships, with credit card issuing behemoth Citibank and financial technology firm FIS, are the first two public proof points of this strategy in action.
Both enable an easy provisioning of PayPal cards via the bank’s mobile app, and both will enable a co-branded experience for the banks.
“What we did with Visa and Mastercard is to give our customers, using these network-branded funding instruments, the ubiquity to use PayPal anywhere they want — in-store, online and in-app — and to have one consistent experience across all of those channels,” PayPal's Jim Magats, VP of payments product and engineering, told Karen Webster before the launch was made public. “These partnerships with Citi and FIS,” he added, “are the first public validations of our commitment to delivering on that promise.”
Importantly, Magats said, consumers pay one way online, perhaps another way in-app and a totally different way in-store. “I think we can start bringing that together,” he emphasized.
Clearly, the ability to “account link” cardholders from Citi to the 5,800 FIs that are part of the FIS mobile and digital platforms will create more opportunities for PayPal to drive more spend and frequency of use of its app. But the new partnerships are boons to the banks who have been desperate for ways to remain visible in a digital world at digital points of sale but lack the ability to “go it alone” given the many challenges of getting acceptance across relevant digital endpoints.
And, in many ways, they level the playing field for smaller FIs to play alongside of their big bank brethren.
“We're democratizing digital commerce for those banks,” explained Doug Brown, FIS SVP and group executive of mobile strategy and product. He added that the partnership with PayPal will first incorporate two banks under the FIS network and will enable these institutions to gain visibility alongside PayPal when customers check out online.
“The banks will benefit from capturing more digital spend from their customers,” Brown added. “PayPal is giving them the great, secure, digital experience, while they get that digital impression upon checkout.” And while FIS said that just two of its banks will see their own cards land in the PayPal platform for online checkout early next year, the firm said it expects many more to follow suit.
PayPal's Magats emphasized that bank benefit, too.
“Especially for these smaller banks, who may not offer a competitive credit card program, this is a great way to go back to their customers and say, ‘We can be digitally enabling,’” he told Webster. “They have an opportunity to see PayPal and Venmo as a partner for omnichannel transactions, for P2P transactions.”
PayPal is able to supports banks' entrance into these channels, Magats noted, because it is positioned as a partner both to merchants and to banks and card issuers, a strategic place at a time when the point of sale, both physical and digital, is evolving.
With Citi, PayPal will develop and launch pilots in 2017 that support both the use of PayPal and the use of Citi cards and enable among the first — if not the first — opportunity for a consumer to use a single method of payment across all three shopping channels.
“In 2016, Citi has made tremendous strides in our mobile offerings to deliver next-gen solutions to enabling banking in the palm of our customers' hands,” explained Citi Head of U.S. Branded Card Ralph Andretta. “We're thrilled to continue that momentum through a new partnership with PayPal in which two leaders in payments are collaborating to further drive innovation and foster a more seamless payments experience.”