PayPal, with Discover Tie, Can Be Used at 7 Million U.S. Retail Locations

In the open-end (general purpose, as opposed to systems that support only one retail brand) mobile payments business, scale really does matter, simply because it is difficult to create a brand new habit unless people can use their new mobile payment features most of the places they ordinarily want to shop.

That’s the reason why the new business agreement between PayPal and Discover is important. Even though Discover lags behind Visa, MasterCard and American Express in terms of active account holders and users, Discover has a big network. PayPal has about 50 million active users.

And although Discover handles fewer transactions than credit-card industry leaders Visa, American Express, and MasterCard, the Discover penetration rate at retail merchants in the U.S. is 95 percent.  That means PayPal can be used at most of the places most people will be shopping, and that is a big deal, indeed.

That represents about seven million retail locations nationwide in the United States. The other angle is that the way PayPal handles the mobile payments also means merchants do not have to buy and install new point of sale gear. That’s another traditional impediment to adoption of mobile payments by merchants.

PayPal users will be able to make purchases using their phone number and a security pin code, a major advantage compared to systems that require installation of new POS terminals.