PayPal partners with Discover to outdo Square/Starbucks in mobile payments

Who needs Starbucks? In an effort to ramp up its mobile payments offerings, PayPal announced today that it will team up with Discover to bring its technology to more than 7 million merchants next year.

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In terms of sheer numbers, the deal one-ups Square’s partnership with Starbucks to replace credit card processing for its 7,000 stores in the U.S., since it brings PayPal’s technology to millions of retail locations. Though it’s worth noting PayPal will be just one of many payment options at Discover locations — with the Square/PayPal deal, Square is taking over all of the coffee shop’s card processing (and getting plenty of publicity to boot, along with $25 million in funding).

Once the integration is implemented, consumers will be able to pay for purchases using their PayPal debit card or their mobile phone number (plus a PIN), at Discover merchants. PayPal has already partnered with retailers like Home Depot and Cumberland Farms (though our correspondent Rocky Agrawal didn’t have many good things to say about the Home Depot experience).

During a conference call today, a PayPal representative noted that eventually all of the company’s payments services will be available in retail, since they’re all cloud-based. PayPal didn’t have a response as to how widespread its PIN-based payment offering would be on Discover’s network, after a caller noted that only a small segment of Discover merchants support PIN payments.

Above: PayPal president David Marcus introducing PayPal Here, photo by Meghan Kelly