Why PayPal is partnering with Walmart to build in-store ATMs

Furthering efforts to expand its brick-and-mortar business, PayPal has struck a deal with Walmart to allow customers to deposit and withdraw cash at the massive American retailer’s 4,700 U.S. store locations. 

For a flat $3 fee, PayPal’s 230 million users can deposit cash into their digital wallets at Walmart cash registers and kiosks. In early November, customers will be able to make withdrawals from PayPal ATMs in 3,000 Walmart stores for the same fee.

Though PayPal launched in-store cash-loading capabilities at CVS and Rite Aid in 2016, and at 7-Eleven in 2017, the deal with Walmart — 90 percent of Americans live within 10 miles of a Walmart store — is the payment processor’s largest brick-and-mortar agreement yet. It marks a diversification from PayPal’s core business of digitally moving money from consumers to consumers, consumers to companies and businesses to businesses. 

Expanding outside of digital payments is critical for PayPal, whose internal projections fell short of third-quarter expectations. With increased competition from payment processors such as Stripe, the San Jose-based company has prioritized moving into other markets and offering additional services.

Along with brick-and-mortar partnerships, PayPal has branched out into other areas. It now provides loans to small businesses, and in June acquired iZettle, a financial technology company that supports those companies. Its subsidiary, Venmo, has prioritized moving from a consumer-to-consumer model to one that permits businesses to give their customers the ability to pay with Venmo.

Through Walmart, PayPal is navigating an intentional outreach to the millions of Americans who may lack access to traditional banking systems and instead stockpile cash or use costly check-cashing services.

Daniel Eckert, svp for Walmart services and digital acceleration, said the arrangement will provide “great value to the many people who rely on Walmart and PayPal to help manage and move their money.”

For Walmart, whose second-quarter earnings beat analyst estimates — but which has been playing defense against e-commerce competitors like Amazon — the partnership ought to drive more customers into the store. The $3 transaction fee is in line with ATM withdrawal fees, and it’s far less expensive than the percentage-based check-cashing services used by millions of unbanked Americans.

“It gives one of (Walmart’s) largest target customer bases another reason to come to the store,” said Thad Peterson, an analyst at Aite Group who covers mobile and emerging payment methods. “The key point here is that they’re targeting underbanked and unbanked customers,” said Peterson.

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