PayPal vs Visa: A History of Enmity and Reconciliation

Electronic payment system PayPal and the company Visa at the end of July 2016 announced the conclusion of a strategic partnership. Thus, the famous war of two technological giants of the financial sphere ended. Today we will talk more about this confrontation, which lasted for many years and included such steps as repeated interlocking of services.

A little bit about the participants of the confrontation

PayPal was created by a group of students in March 2000. In October 2002, it was absorbed by eBay, and from that moment more than 50% of eBay’s auction transactions have been carried out using PayPal.
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In 2015, PayPal withdrew from eBay, and began selling its shares on the market separately. It is noteworthy that the cost of the separated company PayPal in the stock market is currently estimated and continues to be valued higher than the value of its former parent company.

PayPal today is a globally recognized brand. It is the largest and most powerful representative of independent electronic payment providers. The company serves over 169 million active accounts in 203 markets worldwide. According to official statements , the potential annual income of PayPal in 2016 will be from 10.750 to 10.850 billion dollars.

Visa (along with MasterCard and UnionPay) is the largest international payment system. In fact, Visa is a union of more than 21 thousand banks worldwide. Thus, Visa is the intermediary in the operations of thousands of banks and ensures proper technical cooperation between all participants in banking processes.

Visa cards allow you to perform a wide variety of operations for both individuals and legal entities. The modern range of Visa cards is truly huge .

Visa cards are accepted for payment in retail outlets in more than 200 countries of the world. They are also widely used for online calculations.

What caused the conflict

For the past 18 years — since the founding of PayPal — Visa has considered the electronic payment system as its adversary. Indeed, PayPal partly undermined the business of traditional payment systems, by redirecting customers directly to their bank account bypassing the "card", thereby depriving Visa of their fees.

Visa CEO Charles Scharf repeatedly in his public statements called PayPal an "enemy" and said he would compete with PayPal to the last.

Crucial moment

However, in modern realities, the meaninglessness of hostility became apparent. The conflict created an increasingly serious threat to profitability. The resolution of the protracted conflict was primarily beneficial by the companies themselves. And although the transaction was preceded by a series of difficult and tense negotiations, it nevertheless took place on July 21, 2016. The exact terms of the transaction were not disclosed.

According to Craig Maurer, an analyst at Autonomous Research, “investors have favored the message of cooperation. “The stock market is also likely to respond positively to the deal. Without a doubt, the shares of companies will only rise in price. "

Advantages of cooperation

The long-awaited truce finally allows PayPal account holders to pay for goods not only on the Internet, but also in regular stores, via smartphones using NFC technology. In addition, PayPal customers can instantly transfer money to a bank account using a Visa card.

As for PayPal, in addition to active promotion in stores, the company will receive from Visa an influx of new customers who will transfer their funds using an electronic payment system. Visa will also connect PayPal to its e-wallet program.

Visa, in turn, will increase the commission for PayPal users who will transfer money from their account using a card. PayPal also agreed to provide banks with payment data on Visa cards that pass through it.

In a global sense, a partnership of companies will speed up the process of introducing secure, reliable and convenient digital payments to consumers and merchants.

Conclusion

According to PayPal CEO Dan Schulman, the company aims to "give customers the maximum choice of how and where to pay." “Working with Visa is fundamental to our long-term sustainable growth,” he adds.

Visa CEO Charles Scharf noted that “I am pleased with the new chapter in relations with PayPal,” adding that the agreement will allow “working together to provide customers with the most convenient, secure and ubiquitous payment methods.”

A similar PayPal agreement may be concluded with MasterCard in the foreseeable future. According to its CEO, Ajay Bangui, there is already a “constructive dialogue” with PayPal.

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Source: https://habr.com/ru/post/396757/

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