PayPal seeks to extend reach with Visa tie-up - Metro US

PayPal seeks to extend reach with Visa tie-up

The PayPal logo is seen during an event at Terra Gallery in San Francisco, California May 21, 2015. REUTERS/Robert Galbraith/File Photo
By Heather Somerville

By Heather Somerville

(Reuters) – PayPal Holdings Inc on Thursday showed strong growth in its online payments business, meeting Wall Street earnings expectations and announcing a partnership with Visa Inc that is expected to boost the reach and revenue of the money-moving service.

The deal is intended to make it easier for customers to use Visa credit and debit cards in PayPal transactions and allow shoppers to use PayPal in brick-and-mortar retail locations.

PayPal shares were up about 2 percent in after-hours trading. Shares are up more than 30 percent over the last six months.

The San Jose, California, company raised its full-year 2016 revenue guidance to a range of $10.75 billion to $10.85 billion, and projects growth of at least 16 percent.

Second-quarter earnings rose to 36 cents per share, in line with analysts’ expectations, and year-over-year revenue growth rose 15 percent to $2.65 billion.

The Visa partnership allows PayPal users to cash out their PayPal accounts instantly by using a Visa debit card. Any balance in the user’s PayPal account can be immediately transferred to a bank account tied to the Visa card. The process used to take several hours or days, said Bill Ready, PayPal’s global head of product and engineering.

Some retail locations that accept Visa tap-and-pay – a feature that allows the shopper to wave a card or mobile phone over a reader to pay – will also accept PayPal. Ready would not offer specifics on the timeline or locations.

Ready declined to say how much additional revenue the Visa partnership might generate, but said: “When you make payment super low-friction, super easy to do, you see a great increase in volume and conversion rates.”

Some investors voiced concerns about additional transaction expenses, while others cheered the partnership as driving “meaningful upside” for PayPal, analyst Bill Carcache of Nomura Securities said in a research note.

“A collaboration between PayPal and Visa could present a formidable obstacle to Apple Pay (and) Google Wallet,” added Charles King, principal analyst at Pund-IT.

The 18-year-old PayPal is a leader in online payments despite an increasingly crowded field. It has 188 million quarterly active customer accounts, an 11 percent increase, and completed 1.4 billion transactions, a 25 percent jump from the same period last year.

PayPal completed a spin-off from e-commerce company eBay Inc. a year ago. Its current market cap is more than $48 billion.

(Reporting by Heather Somerville in San Francisco; Editing by Matthew Lewis)

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