Starting in June, the fee – which largely singles out PayPal over others – will ensure that the eBay owned payment company is kept in check after generally being given a “free ride” in the payments space.
Despite the news having been announced earlier this year, rumours have been on the rise, finally leading eBay’s share price to fall.
“The fact that PayPal, as the largest digital wallet player, could be singled out by a network like this is clearly negative,” said Evercore Partners analyst Ken Sena.
“Payment networks are taking the gloves off,” wrote Nomura Equity Research analysts Bill Carcache and Brian Noward in a note to investors on Monday.
“The incumbents will do everything in their power to prevent PayPal from riding on the rails without extracting a toll,” they continued.
The fee upon PayPal, along with other digital wallet platforms – such as Google Wallet, Square, iZettle and probably PayPal founder Max Levchin’s new mobile payment platform Affirm, to name but a few – comes as their growth in the payments space has impeded upon that of MasterCard’s.
“Now that PayPal has started moving to the physical point of sale… competitive intensity levels are rising as PayPal encroaches deeper into what has traditionally been the incumbents’ turf,” Nomura’s Carcache and Nowak said.
President of MasterCard’s US Markets, Chris McWilton, complained at a conference last month that PayPal “rides for free,” before adding: “they’ve got to be cautious that they don’t get too big and start making people wake up and say wait a minute, I’m actually losing business here because of your moving into the physical space.”
PayPal recently expanded their mPOS device PayPal Here into Japanese territories to capitalise upon the incredible number of small businesses in the region. This came after their arrival in the UK with a reworked chip & pin device to help capitalise upon the small business market there too.
Do you think that this digital wallet fee is the right move for Mastercard and other card issuers?
Will issuing a fee mean the growth of mobile payments begins to slow?
Let us know by sounding off with your comments in the space provided below.
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