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PayPal Nabs Uber Partnership in Pursuit of Mobile Growth

PayPal, the online payment service that succeeded by wedding itself to EBay Inc. (EBAY), is moving into more modern marketplaces through a deal with car-service company Uber Technologies Inc.

Users of Uber’s popular mobile-booking application will be able to pay with PayPal starting today in the U.S., France, Germany, Italy and the Netherlands, David Marcus, president of PayPal, said in an interview. Riders who use PayPal before Nov. 28 will receive $15 or 15 euros toward their next trip.

After pioneering Internet payments and then being acquired by San Jose, California-based EBay in 2002, PayPal became a multi-billion dollar annual business. The company has been slow to make headway into newer marketplaces that cater to a mobile-savvy group of users and developers, Marcus said, while posing as an Uber driver and chauffeuring reporters around San Francisco to show off how the service will work.

“Our experiences inside mobile apps were not meeting the bar a year ago,” Marcus said, from the driver’s seat of a black Ford Expedition. “It’s important to be where disruption occurs. You want to partner with the companies creating an amazing consumer experience.”

The market for mobile payments in the U.S. is projected to jump to $90 billion in 2017 from $20.5 billion this year, according to Forrester Research. (FORR) In that area, PayPal faces stepped up competition from Square Inc. and Google Inc.

PayPal has been criticized for antiquated software that makes it hard for merchants and developers to use the service, something Marcus has tried to streamline. He vowed to bring “startup energy” to PayPal when he took the helm in April 2012.

Mobile Upgrades

To work better with mobile services, PayPal has developed functions that allows users to pay without leaving a merchant’s app. Its shortcomings on mobile gave younger companies with simpler offerings such as Braintree a chance to win users at PayPal’s expense. PayPal agreed to acquire Braintree earlier this year for $800 million.

The improvements may help PayPal make headway into other popular marketplaces such as room-sharing service Airbnb Inc., which doesn’t use the company’s payment offering in its mobile app, Marcus said.

Uber is banking on international growth to justify its $3.5 billion valuation, achieved in a financing round led by Google’s venture arm in August.

The company only allows users to pay via mobile phones and is limited in countries such as Germany that don’t have wide credit-card adoption, Travis Kalanick, chief executive officer of the San Francisco-based company, said in an interview.. PayPal’s 137 million active users were also a draw.

“Who else has that kind of distribution -- is there even anyone close?” Kalanick said. “The PayPal deal helps us go international. For Uber, this is about new users.”

To contact the reporter on this story: Danielle Kucera in San Francisco at dkucera6@bloomberg.net

To contact the editor responsible for this story: Pui-Wing Tam at ptam13@bloomberg.net

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