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Could PayPal Compete with Visa and MasterCard?

Monday, October 29, 2012 1:31

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(Before It's News)

Google, Square, Starbucks, Best Buy, Isis, Wal-Mart, Target, Lowe’s, CVS, Shell and Sears, among others, do not believe their role is to displace the transaction clearing role provided by Visa, MasterCard and others in the payments ecosystem.

But others plan to try. PayPal is among those challengers, and Nick Holland, Yankee Group analyst, thinks “PayPal could provide a competitive threat to Visa and MasterCard.”

And other potential contestants lurk. Apple is four times bigger than PayPal, in terms of cardholders on file, says Holland. And yes, Apple will be a player, in some way, at some point.

But Holland also believes the card associations (Visa, MasterCard, American Express, Discover) win, no matter what else happens.

At least part of the reason is that there are many other ways to use mobile apps and features to augment and improve the retailing experience, without challenging the payment network functions, Holland argues.

Nor is it especially promising to do anything that requires merchants to replace their point of sale terminals, says William Stofega, IDC analyst.

Besides, says David Kaminsky, Mercator Advisory Group analyst, the “value for merchants is the other stuff, not primarily lower interchange fees.”

But what merchants really do want is lower transaction fees, says Abelardo Mendez, Knight Capital Americas analyst.