PayPal has signed a deal with Visa that allows it to issue Visa branded debit cards in Europe, as the company moves further into traditional retail banking territory.
The two companies penned the agreement to collaborate in offering payments services across the continent, cancelling a longstanding competitive tension.
Card companies have come under pressure from the rise of PayPal, whose users are able to make payments directly from bank accounts, bypassing the card network. As part of the deal, PayPal, which already has a banking licence in Europe, will be able to offer PayPal-branded Visa debit cards.
The move is expected to appeal in particular to small businesses that carry balances in their PayPal account for buying supplies, or for people who do not have a bank account but use PayPal. Until now, PayPal has used its banking licence largely for treasury functions.
The deal with Visa opens up a broader customer base as the company shifts towards retail banking. PayPal says there is no immediate goal to launch a debit card although planning is under way.
PayPal already offers pre-paid cards with MasterCard in some countries, such as Italy. It also offers debit cards in the US. The move would mark a first in Europe.
The deal with Visa will give PayPal users access to Visa’s contactless payment points in retailers and shops across Europe, providing PayPal with access to in-store retail transactions. It also means that customers would be able to use their phone to “tap and pay” in a shop, for example, through their PayPal account.
The development is a boost for PayPal, which has traditionally operated online as a payments service, by deepening its foothold in the world of in-store commerce. For Visa, the deal makes it easier for PayPal customers to pay with their Visa card online or in a mobile app.