PayPal’s new credit card could shore up merchant relationships

The news: PayPal launched a new cash-back credit card for small businesses, per a press release. The PayPal Cash Back Mastercard is issued by WebBank.

Here’s what businesses get:

• Cardholders can earn unlimited 2% cash back on all purchases.
• PayPal provides a virtual card for immediate use and a physical companion card. It also offers free employee cards with separate account numbers.
• The card comes with a two-year extended warranty benefit, mobile phone protection, merchant offers, and identity theft protection, among other benefits.
• Merchants can access and manage transaction data, balances, rewards, and other card information through PayPal’s platform.

The benefits: The new card meets several needs for PayPal’s small-business clients.

• Financial services. Card popularity among SMBs is swelling alongside a cash flow crunch: 29% of US employer firms sought a credit card in 2021, per the Fed. And most small businesses have more than one, per Mercator. PayPal’s new card can help meet this sector’s needs and ensure businesses have the financing they need to grow.
• Interoperability. Nearly 7 in 10 SMBs rank interoperability as “very” or “extremely important.” Being integrated into PayPal’s platform can improve the card’s utility by letting merchants maximize the services, data, and insights they can access.

What it means: The new card can help PayPal shore up its seller relationships and generate revenues.

Its first business card can help PayPal differentiate itself from competitors like Block and more effectively compete with larger banks that use credit to complement their small-business suites—especially as providers like Amex hone in on the space.

It can also limit attrition: Rather than cobbling together insights and services from various third parties, merchant clients can access more from PayPal, making it more useful. And it can generate a new stream of revenue for the provider.

The bigger picture: PayPal has been doubling down on merchant services. It recently updated its fee structures, partnered with Aon to improve insurance access, and integrated return logistics firm Happy Returns directly into its offering.

Doing so can help PayPal more effectively serve its 35 million merchant accounts and further expand its base, which grew 12.9% annually in Q1 2022. That would underscore bigger picture long-term success—merchants are responsible for most of PayPal’s revenues.

Go deeper: Our Small-Business Payment Disruptors report offers more insights on how merchant services players can most effectively attract small business customers.