Monday 25 July 2016

Should PayPal cooperate with Visa?

PayPal and Visa previously competed against each other; however, they build up a partnership that PayPal can now access to the Visa's contactless payment points in America while PayPal stop encouraging its customers to link to bank accounts and Visa will provide some economic incentives to PayPal in return.  It seems that both companies can win greater revenues by accessing to larger markets. However, my opinion is that Visa is a bigger winner in this partnership. Firstly, Visa infiltrates its business into PayPal's business when more PayPal customers link their accounts directly to Visa. This could be seen as a strategy of Visa extending its business among its existing customers. On the other hand, PayPal can receive  economic incentives from Visa and make PayPal not just digital but also physical as well by having access to the contactless payment points. However, compared with the existing Visa customers linking their PayPal accounts to Visa, the PayPal customers may not have the same incentive to use their PayPal physically as they have many more alternatives, such as Apple Pay. To conclude, Visa cooperates with PayPal in order to enter a limited but less competitive market (the PayPal customers), while PayPal cooperates with Visa to enter a wide but more mature and more competitive market; therefore, I believe Visa expectedly benefits more in the partnership than PayPal does.

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