At a recent JPMorgan tech conference, Visa’s CEO Charlie Scharf basically admitted that Visa has a “love/hate” relationship with PayPal. I too admit, when I was running Discover’s merchant network, I felt the same way.
On one hand, PayPal generates substantial volume for the card networks, although it’s not clear how much of that, if any, is incremental. If PayPal weren’t around, buyers would likely either use their cards directly or through another digital wallet.
On the other hand, PayPal has popularized payment by ACH, at much lower cost than card-based payments. And the volume that does flow to the card networks through PayPal does so indirectly, with less data about the transaction and with some brand dilution. A consumer is more likely to feel that they “paid with PayPal”, not “paid with my PayPal wallet using my Visa card as a funding method”.
PayPal is an interesting animal… part digital wallet, part payment brand, part card issuer, part payment processor. Card networks have little choice but to play nice with PayPal, but Scharf’s comments are a clear indication that they are thinking about how to level the playing field.
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