Why PayPal Piles On Options for Loading Cash

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PayPal offers no shortage of choices for loading their accounts, including Green Dot, MoneyGram, Coinstar and its own My Cash Card — but are consumers using them?

Overall, use of PayPal's offline funding options is growing at a triple-digit yearly rate, says Patrick Gauthier, a general manager of emerging retail services at PayPal. Gauthier would not declare a winner, but says the diverse choices are necessary to accommodate current shopping trends.

"A consumer experience with Coinstar is different than Green Dot or My Cash," Gauthier says. "Our view is the more choice you give consumers the better off people are. Our job is not to pick a winners and losers [among payment companies], but to connect our partners, merchants and the consumers in a way that is the cleanest in the market."

My Cash Card, which launched about ten months ago, is a single-use reload card developed by PayPal and InComm. It can be purchased in more than 30,000 retail locations for $3.95, and is used to deposit funds by paying cash in stores. The card has a PIN from the back that is used to link the card to the purchaser's PayPal account. My Cash Card's adoption has been quick and widespread, and despite being designed for the cash user it has found an audience among bank customers, Gauthier says.

"It's easy to think the only people who are using the service are the underbanked, but we find that folks that are using it are budget-conscious and are using [My Cash Card] as a way to control their spending online," Gauthier says.

PayPal's My Cash Card resembles Green Dot's MoneyPak, a reload card for Green Dot's prepaid cards. Money Pak can also be used to fund PayPal accounts.

Green Dot reports third-party reloads represented about 28% of Green Dot's cash transfer revenues during the most recent quarter, an increase from 23% a year earlier. Green Dot would not break out numbers specific to PayPal.

PayPal also lets users load funds at Outerwall's Coinstar kiosks and plans to add MoneyGram locations as part of an expanding relationship with MoneyGram.

"Some of the inactive accounts [PayPal] has may use the MoneyGram service to get funds," says Tim Summers, head of emerging channels and strategic partnerships at MoneyGram.

Coinstar supports PayPal at 3,400 of its 19,000 locations, and is planning to support it at more.

PayPal is not concerned that its partners "compete against each other," Gautier says.  Instead, its partners provide geographic diversity.

Coinstar has more than 19,000 kiosks deployed in the U.S. including Albertsons, Brookshier's and Safeway.  PayPal's My Cash Cards can be purchased at CVS, Rite Aid, Family Dollar and other locations. Green Dot's MoneyPak is primarily distributed at Walmart, which has an in-store relationship with MoneyGram. 

And although these partnerships are not directly related to PayPal's strategy to become an option at the cash register, they may make in-store payments more palatable.

"By making it easier for not just the underbanked but just about everyone to use PayPal in an offline situation, the company is increasing its overall traction with consumers. They have also been very smart in finding partners for this strategy," says James Wester, a research director for IDC Financial Insights.

The My Cash Card in particular has had a substantial impact on PayPal's diversification beyond electronic payments, Wester says.

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