As it seeks new business in Europe, PayPal is expected to soon launch a partnership with Vodafone that would allow Android smartphone users to make contactless tap-and-go payments at the point of sale. At the same time, Apple has begun securing bank partnerships for an imminent launch in China, according to reports.
The concurrent moves are a sign of each company taking risks to secure a foothold in new markets.
The PayPal partnership with Vodafone is perhaps the biggest departure in strategy among a major contender in the digital wallet arena. In the past, PayPal has barely flirted with Near Field Communication even as Apple, Google and others chose NFC as the foundation of their digital payment strategies.
Through the reported Vodafone partnership, millions of PayPal customers will be able to add their accounts to the Vodafone Wallet to make contactless payments. Vodafone customers who do not have a PayPal account can sign up for one through the wallet app, according to a Feb. 12 press release from processor Carta Worldwide, a partner in the project along with Raphaels Bank.
The companies are expected to reveal the launch date for the PayPal partnership next week at the Mobile World Congress.
“Money is going digital, and the smartphone is at the center of this transformation," PayPal Europe CEO Rupert Keeley stated in the release. "Our partnership with Vodafone will enable millions of our customers in Europe to make contactless payments for the first time in their favorite high street stores using their mobile phones.”
It all represents a potential opening for PayPal, which has a solid online user base in European countries on which to establish a foundation it hopes to accelerate through a partnership with Vodafone and its subscribers. But it likely won't translate to automatic consumer and merchant acceptance in retail stores.
Both PayPal and Vodafone have been successful in some areas of mobile payments, but have struggled to break into the physical point of sale, said Zil Bareisis, a London-based senior analyst for research firm Celent.
PayPal’s previous ventures with Discover and Home Depot to gain in-store presence have fallen flat.
The devil will be in the details for both companies, Bareisis said. "If simply by linking a PayPal account to a Vodafone Wallet, it allows me to check out in a store via PayPal, then that’s great," Bareisis said.
However, Vodafone Wallet was built around a prepaid account, which needed to be linked to a card or a bank account. That could make it somewhat cumbersome for a user to navigate, considering a PayPal account is also funded through a link to a card or bank account.
"Does it help PayPal that I can now use its account inside Vodafone Wallet?" Bareisis asks. "Not necessarily, because as a consumer the value of a PayPal relationship is the wallet app and where it’s accepted, not the account itself, which I fund with a card anyway."
In cozying up to a telco, PayPal is taking a path to mobile payments more suitable to its business model, rather than seeking a lot of bank support as Apple and Google have done.
Vodafone Wallet, introduced two years ago, was originally a loyalty card wallet for Android users, utilizing a special SIM card on the handset for security. It added NFC nearly a year ago to introduce payments for Visa and MasterCard cardholders.
Competitors can't sit still in the mobile wallet game, and Apple is providing another example as the Commercial Bank of China posted on social media Feb. 16 that Apple Pay would be available for its customers this week, according to 9to5Mac. Apple has long eyed China as fertile mobile wallet ground, though it goes up against heavyweights like Tencent and Alibaba.
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Corrected April 1, 2016 at 8:46AM: An earlier version of this story misidentified Vodafone in one paragraph.