PayPal issues cash-back MasterCard
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PayPal issues cash-back MasterCard

Digital payment provider PayPal has introduced a cash-back MasterCard in partnership with Synchrony Financial. The card will give its holder 2% cash back on purchases, and comes without an annual fee, a cash back limit, or restrictions as to how cash can be spent. However, it will only be available to PayPal customers. This isn’t the first time PayPal has offered financial incentives to its customers, and just like its previous credit options, one of the benefits of this new scheme is its instant availability: as soon as you’re approved for a PayPal MasterCard, you can use it via your PayPal account – you don’t have to wait for the physical card to arrive via the post.

PayPal and MasterCard have seen their share prices appreciate by 45% and 18%, respectively, this year-to-date.

paypal mc0509

SOURCE: Yahoo Finance

There are good reasons to think that PayPal’s new credit card will be a spur to further growth. It is already apparent that PayPal customers who have the card spend 35% on the company’s platform more than non-cardholders. They also log in to the company’s mobile app and website three times more than they did before having the card.

Looking at the bigger picture of rewards schemes, as much as 60% of customers rank them as “a major reason for adopting a credit card” according to TSYS’ annual U.S. Consumer Payment Study.

PayPal’s card is just the latest move in an aggressive strategy of incentives designed to popularize its platform and enhance its reach for users. In the last 18 months, the company has entered into 24 partnerships, with big names like MasterCard, Visa, Apple, and Samsung.

So far, these incentives seem to be working out exactly as the company is planning: in the last quarter, the company saw its net new additions of customers skyrocket by 80%, adding 6.5 million people to its platform. These people were spenders, too. PayPal said that it processed 1.8 billion payment transactions during the quarter – a rise of 23% against the same period the previous year. With all metrics showing strong positives, the company clearly knows what it’s doing.

Disclosure

Dominion holds PayPal in its Global Trends Ecommerce Fund.


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The views expressed in this article are those of the author at the date of publication and not necessarily those of Dominion Fund Management Limited. The content of this article is not intended as investment advice and will not be updated after publication. Images, video, quotations from literature and any such material which may be subject to copyright is reproduced in whole or in part in this article on the basis of Fair use as applied to news reporting and journalistic comment on events.