PayPal targets the high street through MasterCard deal

As a significant user of Mastercard ($40,000+ per anuum) and a user of PayPal, almost entirely through eBay, I am at a loss to understand the benefits. I can only assumed that this tie up is not aimed at me.

Successful arm twisting by MasterCard and Visa to put a kabosh on PayPal's many years of successful arbitrage between ACH and cards. While I don't feel too sorry for PayPal, it is a part of trend towards closing the 'free' ACH / Bill Pay capabilities. Unless there is another disruption, consumers and businesses can expect to see higher fees for money transfers, and payments.

Al contrario, amigos. Melvin - what this means is that you won't have to pay fees to cash-out from PayPal to your MC debit. You can skip the wait period of ACH and have your money faster. A deeper partnership also might mean special deals for people with your kind of volume.

Dinesh, they're not closing off ACH, they're just making the default setting something faster that is now being offered for free. ACH is a slow, lumbering dinosaur and if we can get our money faster and avoid fees at the same time, it's a win for the customer.

ACH isn't slow. The banks can choose to speed it up, but they won't till they can figure out a way to monetize it. But you're right - it wasn't designed for the front-end interactions, just for the back-end settlement. The disruption was PayPal's successful use of the mechanism to effectively create an outsized margin by funding for 'free', while charging at the card rates. I'm surprised that it's taken the banks and their surrogate visa/ mastercard networks this long to figure out a way to throttle that and get in on it. The key turns out to be their offline presence, and the threat of the digital wallet fees. PayPal tried very hard to gain a foothold offline on its own, and to fight the digital wallet fees, but failed. Hence, the agreement.

BTW, I'm not sure how you think we avoid the fees. The merchants will continue to cough it up, and pass it on to the consumers.

Curious to know more about the speed of ACH. I'm going off this Bloomberg article that came out a few years back - has there been an improvement since?

I meant fees to the end user, not the merchant: "MasterCard will be presented as a 'clear and equal payment option.'" I'm reading this as no fee to the user, since they currently charge no fee for ACH.

ACH is an overnight settlement system so money movement shouldn't take more than 24 hours. Beginning this month, NACHA is introducing rules to enable same day ACH so you can technically have the same day money money movement during one of the windows. All of the delays occur either because of holds placed for risk management, or because an intermediary such as PayPal is in the middle of your bank and your payee's bank. So, a one step credit push (almost no risk), becomes a 2 step - debit/ credit transaction with credit & float risk. When you add in the governmental protections where a consumer has over 90 days to challenge an unauthorized debit, and a business has 3 days, a transaction that technically can occur in less than a day ends up taking multiple days. Even Visa and MC do not settle in real time (ask any merchant who takes credit card payments!) however, with appropriate authorizations and network rules, they can create the perception for the consumer.

Thanks for the clarification - I'll continue to follow NACHA developments.

This agreement is all about MasterCard securing its position in the face of threats from the banks and PayPal no longer having to pay card fees.

There is no benefit to the customer.

At least MasterCard are being pro-active in addressing upcoming threats to their business.

What are the banks doing?