The deal gives PayPal more fuel to expand its footprint into physical stores through the VDEP platform, helping PayPal extend its online payments dominance to physical stores. PayPal has made several efforts to get into the physical payments space over the past several years, says Jared Drieling, business intelligence manager with electronics payments consultancy The Strawhecker Group. “This partnership may help PayPal get into the physical store in a more meaningful way through the mobile device,” Drieling says.
For Visa, the deal is designed to help it reach more consumers. Before PayPal struck a deal with Visa, the payments processing company would encourage its users to deduct payment transactions from their bank accounts (as opposed to credit cards) through the Automated Clearing House system (ACH), which connects financial institutions outside of payment card networks. Fees on ACH transactions are only a few pennies, making them a less expensive transaction for PayPal to process than a credit card transaction, for example. Now, PayPal place equal weight to ACH and checking account options for its users.