PayPal and Google Sign New Digital Wallet Partnership

PayPal and Google deepened their relationship with a new agreement that enables payments through the tap of a phone from PayPal accounts at thousands of new retail locations, according to Bloomberg.

The partnership lets PayPal users link their accounts to Android Pay, Google’s digital wallet, on smartphones running most versions of the Android operating system. This makes PayPal a funding option when people use Android Pay in some locations. PayPal was added as a payment method for Google's Play app and digital content store almost three years ago.

PayPal CEO Dan Schulman has been busy cutting deals with banks, credit card issuers and wireless carriers to convert PayPal from a payments button on websites into a versatile financial tool used to make payments in stores, transfer money overseas and shop from smartphones on the go.

The Android Pay deal increases PayPal’s reach in stores, which Schulman sees as key to getting customers to use PayPal more frequently than the current average of two to three transactions per month. One big challenge remains: PayPal accounts can't link to Apple Inc.’s digital wallet, Apple Pay.

The stronger relationship between Google and PayPal could rekindle speculation about an acquisition. PayPal split from parent company EBay two years ago, prompting hope it could be a target of tech companies or financial institutions looking to enter the digital payments industry. PayPal processed $354 billion in payments through 197 million active customers in 2016.

Shoppers accustomed to swiping credit cards have been slow to embrace digital wallets, which use NFC technology. The PayPal deal may  boost Google’s mobile payments efforts, which have progressed in fits and starts. The search giant’s Google Wallet failed to gain traction, and its Android Pay faces competition from Apple. Two years ago, Samsung introduced its own payment system, Samsung Pay, for its devices.