What The Discover, PayPal Agreement Means For VARs

By now you’ve probably heard about the partnership between Discover and PayPal, which will give PayPal account holders the ability to pay for purchases using their PayPal accounts anywhere Discover is accepted. As the official press release states, the agreement brings PayPal to more than 7 million merchant locations across the U.S., and potentially to millions of international merchant locations in the future, beginning in 2013.

According to John Badovinac, senior manager of acquirer relations for Discover Network, the first priority will be issuing cards to PayPal account holders. To get to market quickly with a proven methodology that everyone can use, they’re issuing cards to PayPal account holders. This means that in short order, 113 million active PayPal customers will be carrying Discover cards (although Badovinac says the cards will carry PayPal branding only). Consumers using the cards will be able to make purchases, and then manage from where the money is drawn, at a later time online.

This is great for Discover and PayPal, and consumers get a flexible new payment option, but should VARs and ISVs care? Discover says that to offer PayPal, merchants will not have to install or upgrade existing POS hardware or software. So, upgrades are out as a revenue generator. Where’s the opportunity?

If you’re a smart VAR focused on increasing your payment processing recurring revenue, you should be seeing dollar signs. Badovinac points to the 113 million new card carriers representing billions of dollars of potential spend. The bottom line for VARs is that if you’re providing merchant processing to your customers, you want them to accept Discover so you can get a cut of all those transactions!

For the past 12-18 months, Discover has been looking for VARs to check with their merchants to ensure those merchants can accept the Discover BIN range. Now this initiative has hit a new level of importance with the PayPal agreement.

What you have here is a great opportunity to 1) educate your merchants about a big opportunity for them to gain access to a huge pool of potential customers and 2) increase your potential processing residuals.

For information on partnering with Discover, educational resources to help you get started, and the financial incentives available, visit http://www.discovernetwork.com/value-added-reseller/.