PayPal, J.P. Morgan Chase Make Deal to Expand Mobile Payments -- Update

By Peter Rudegeair Features Dow Jones Newswires

Two of the highest-profile companies providing mobile wallets in the U.S., J.P. Morgan Chase & Co. and PayPal Holdings Inc., will now be partners as well as competitors under terms of a new deal set to be announced Thursday.

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The agreement is expected to help broaden the reach of J.P. Morgan's Chase Pay service, a smartphone application the bank launched last year to drive usage of its credit and debt cards for in-store and internet purchases.

The deal, which is expected to be fully rolled out by 2018, will also make it easier for customers to load their J.P. Morgan cards into PayPal's rival application and let them use their reward points to pay for goods and services through PayPal.

"These are parallel strategies," said Jennifer Roberts, the J.P. Morgan executive overseeing Chase Pay. "We want to be where our customers are."

The rapid growth in mobile-payment transactions has drawn interest from firms from a variety of industries, from smartphone makers like Apple Inc. to credit-card networks like Visa Inc. and retailers like Wal-Mart Stores Inc., and led them to develop their own digital wallets to capitalize on the opportunity.

The volume of mobile online retail payments is expected to reach nearly $319 billion in 2020, up from $122 billion in 2015, according to consulting firm Javelin Strategy & Research.

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PayPal has a leg-up over many of those other companies thanks to its nearly 20-year history in e-commerce. The company says it has 94 million active U.S. customers, and analysts at Morgan Stanley said last year that PayPal was accepted at 73% of large internet retailers.

Since last summer, the San Jose, Calif-based company has been angling to handle more payments that happen at physical retailers.

The J.P. Morgan agreement enables its cardholders to pay via PayPal in brick-and-mortar stores. Previously signed deals gave the same option to PayPal users who hold cards issued by Citigroup Inc., Discover Financial Services and Wells Fargo & Co as well as users of Android Pay and Samsung Pay.

"A lot of their customers are already in a PayPal environment," said Jim Magats, PayPal's head of payments, product and engineering.

The latest agreement will help solve a different problem for J.P. Morgan. Chase Pay is accepted as a payment method at big merchants such as Starbucks Corp. and Best Buy Co. but relatively few big e-commerce and technology businesses.

As part of the new deal, PayPal will add support for Chase Pay as a payment method for merchants who process payments through Braintree, a PayPal subsidiary that counts companies like Uber Technologies Inc. and Airbnb Inc.

Despite this latest partnership, J.P. Morgan and PayPal will still compete in other areas. Last month, the bank connected its smartphone apps to a digital money-transfer service called Zelle that rivals PayPal's Venmo unit.

Write to Peter Rudegeair at Peter.Rudegeair@wsj.com

(END) Dow Jones Newswires

July 20, 2017 08:55 ET (12:55 GMT)