PayPal Gets a Key Boost at the POS Through a Wide-Ranging Deal With Samsung Pay

In a deal that follows months of partnership agreements with other payments companies, PayPal Holdings Inc. on Monday said its PayPal service will become available as a payment method in Samsung Electronics Co. Ltd.’s Samsung Pay wallet. When it goes live, the link is expected to go a long way toward satisfying a long-held ambition at PayPal to have its service widely accepted at physical stores.

For Samsung Pay, the deal will significantly extend its reach to online merchants by making it accessible through PayPal’s Braintree Direct payment service.

While it remains unclear exactly when the integration will go live—a blog post by PayPal chief operating officer Bill Ready says “soon,” a word repeated by a PayPal spokesperson in an email responding to questions from Digital Transactions News—it is slated for support on Samsung smart phones including the Galaxy S8 and S8+.

With its Samsung Pay agreement, PayPal has now concluded integration deals with two of the three major third-party mobile wallets, having reached a similar pact with Alphabet Inc.’s Android Pay in April. While there is yet no PayPal-Apple Pay integration, Apple Inc. last week announced it is making PayPal available as a payment method on its digital stores, including iTunes, Apple Store, the App Store, and Apple Music.

The Samsung Pay link also represents the latest in a series of partnerships PayPal has struck since last summer with payments firms often considered its competitors. The biggest of these include deals with Visa Inc. and Mastercard Inc. that apparently ended years of rancor between those networks and PayPal by requiring the San Jose, Calif.-based company to stop favoring the automated clearing house over cards for account funding. In return, PayPal gained access to the networks’ token engines, a key step for in-store payments.

Now, by riding inside Samsung Pay’s wallet, PayPal has taken another leap toward mass acceptance in stores. Like its third-party rivals, Samsung Pay works with near-field communication to link to merchants’ terminals. But it also uses a technology it owns, called magnetic secure transmission, to mimic card swipes.

This allows the wallet to work not only with EMV/NFC terminals but also with checkout devices that haven’t yet been upgraded or replaced. “Samsung Pay is accepted at the vast majority of merchants due to their MST technology, and now PayPal will be as well,” the PayPal spokesperson says. Without being specific, a Samsung Pay press release refers to “millions of merchants” now accepting Samsung Pay.

PayPal’s effort to penetrate the physical point of sale date back at least to 2012, without much success to show for it. Now, deals to be included in rival wallets may help the company finally realize that ambition, observers say. “That removes the need for PayPal to become a native payment method at the point of sale, which used to be their strategy, but which they seem to have abandoned in favor of these wrapper deals,” notes Aaron McPherson, an independent analyst who follows mobile payments.

What Samsung Pay gets in return could be equally crucial. While PayPal refuses to say how many merchants Braintree processes for, it ranks among the larger e-commerce service payment-service providers. Now, through the PayPal deal, Samsung Pay will become an option through Braintree, opening a wide window for the wallet in e-commerce. “With just a few lines of code, merchants will be able to easily integrate Samsung Pay, offering their customers greater flexibility in how they pay,” says Samsung in its release.

The Braintree connection shouldn’t be underestimateed, observers say. “The deal also works for Samsung, as it … will provide Samsung with a significant extension to its online acceptance. Over time, it could also boost in-store usage of Samsung Pay, but the online acceptance component provides the more immediate benefit,” says Rick Oglesby, principal at AZPayments Group, a Mesa, Ariz.-based consultancy.

For its part, PayPal isn’t done seeking out partnerships. The company, which last year processed 2 billion mobile payments worth $102 billion, clearly has an appetite for volume. “We will continue forging new collaborations with leaders across the tech and financial worlds,” said Ready in his post.