PayPal and Discover Credit Cards announced their partnership today, under which PayPal will issue cards Next Year to its more than 50 million active users in the United States. They can use the cards to buy from merchants that are already part of the Discover Credit Cards Network, which links more than seven million retail locations nationwide.
For Discover — the fourth-largest credit card company after Visa, MasterCard and American Express — PayPal’s large user base would generate significant transaction volume for its payments network. PayPal users will be able to pay at retailers in the Discover Network by swiping their new cards through existing checkout machines and entering a four-digit personal identification number.
Initially, consumers will have to sign-up for a Discover-backed and PayPal-branded credit card, which does little to slim down the number of items consumers are carrying around in their wallets. Later, consumers will also have the option of paying by entering their Mobile phone number and PIN at the terminal.
PayPal will charge retailers a “small” fee when users pay with the new cards, and in turn will pay Discover Credit Cards for access to its network on a per-transaction basis, the companies said. They declined to specify the fees. Good news for the Merchants is that they will not need to buy any new hardware or software to accept PayPal.
But the big question is whether consumers trust PayPal enough to be the card they use to make everyday purchases, from gas to groceries to clothing. The company has been around long enough and has significant brand recognition, but in that time, the online payments pioneer has also been a target of customer resentment. Sites like PayPalSucks.com, and its accompanying Facebook page, are forums where consumers frequently rant.
Almost anytime I write about PayPal, commenters voice their dislike for the eBay-owned company. From an earlier post, one person complained: “PayPal is one of the worst companies to deal with. I’d rather pay with pretty much any method than PayPal.” Another said, “I like Discover Credit Cards, but hate PayPal with the fire of a thousand suns. To be honest, this agreement sours me on Discover Credit Cards a bit, just because PayPal is so anti-consumer.”
So the Big Question is Will the Customers Join?
