Discover Strikes a Deal With PayPal

PayPal will be available at millions of merchants in 2013

By Alyssa Oursler, InvestorPlace Contributor

Discover Financial Services (NYSE:DFS) and eBay (NASDAQ:EBAY) have each seen gains of more than 4% this morning on the news they have teamed up to make the PayPal payment system available to Discover customers at more than 7 million merchant locations across the U.S.

The deal is just the latest in a move towards mobile payments, as Starbucks (NASDAQ:SBUX) partnered with Square and many major retailers, including Wal-Mart (NYSE:WMT) and Target (NYSE:TGT), teamed up to create a mobile payments network recently. With this deal, though, merchants will not have to install or upgrade anything in order for PayPal to be accepted.

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As Don Kingsborough, PayPal’s Vice President of Retail, said, “This relationship will allow for a truly seamless digital wallet, available most places consumers shop offline, which offers the speed, simplicity and security already enjoyed by 113 million active PayPal customers online.”

In theory, the deal could give Discover an edge over big names like Visa (NYSE:V) and MasterCard (NYSE:MA), who have been the center of conversation lately on the news that the companies will no longer ban credit card surcharges.

Today’s jump brings Discover’s year-to-date gains to just over 60%. Assistant Editor Kyle Woodley — a huge supporter of the company since late last year — retains his hypothetical lead in InvestorPlace‘s Top Ten Stocks for 2012 contest. His pick would still be nearly doubling the current leader, had he been allowed to participate.

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