PayPal’s cards can now be used through Apple Pay, a ploy to get closer to top-of-wallet status

The news: PayPal and Venmo credit and debit cardholders can now add their cards to Apple Wallet, per a press release.

Why it matters: PayPal outlined how expanding its relationship with Apple benefits their “mutual customers” in its Q3 2022 earnings.

• PayPal added Apple Pay as a payment option for its Advanced Checkout in April.
• And it brought Apple Tap to Pay on iPhone to the PayPal and Venmo apps, although it’s still only available to select users.

Breaking down its walled garden and integrating with Apple’s offerings is a new growth strategy for PayPal that reflects how it sees its ecosystem moving forward.

How it benefits Apple: Integrating with PayPal will bring Apple more revenues and valuable data.

• Apple Pay gets an incremental fee for every Wallet transaction, paid by the credit card issuer. Given PayPal’s large user base, it could open up Apple to a vast new audience to extract fees from.
• Apple will also get access to new spending data, which could be especially useful as it gives a more comprehensive spending picture of consumers who use Apple Pay but may use PayPal’s cards for specific purchases.

What’s in it for PayPal? Allowing spend on a competing wallet may seem counterintuitive: PayPal will lose out on those transaction fees, and it may reduce loyalty between the PayPal or Venmo cardholders and their associated wallets.

But letting its cardholders use Apple Pay can bring key benefits to PayPal that the company hopes will outweigh the losses.

• Using Apple Pay is an entrenched habit for many consumers. We expect 45.8% of iOS users will transact with Apple Pay in 2023, per our forecasts.
• This will amount to about 55.8 million US users in 2023, growing 9.9% year over year (YoY).
• People are going to use Apple Pay, regardless of the card behind the transaction, so enabling its cards in the wallet gives PayPal some of this volume.
• Working with Apple Pay can therefore enhance loyalty to the PayPal cards and help bring them closer to top-of-wallet status.

This article originally appeared in Insider Intelligence's Payments Innovation Briefing—a three-times-weekly recap of top stories reshaping the payments industry. Subscribe to have more hard-hitting takeaways delivered to your inbox daily.

• Are you a client? Click here to subscribe.
• Want to learn more about how you can benefit from our expert analysis? Click here.