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Aug 04, 2020
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Much has been said about the Paypal second quarter results which saw the digital payments provider achieve a record $5.3 billion in net revenues thanks to the shift to online spending for many consumers. Additionally, the company recently announced the roll-out of the Paypal QR Code in an attempt to prove everything old is new again. This “new” product comes 5 years after the company acquired Paydiant, which was famous for their use of QR codes for point of sale transactions. There is one additional new product from PayPal that has been quietly released, and it also points back to the past. It seems Paypal is once again flirting with virtual cards with a new product called ‘Paypal Key’.

What is the Paypal Key
According to the Paypal support site, “PayPal Key is a virtual card and a new way to use your PayPal account anywhere cards are accepted online. You can use PayPal Key like a card at any online merchant that accepts Mastercard – even those that don’t have a PayPal button.” For many users, this will remind them of the virtual cards offered by companies like Bank of America, Capital One, or others the allow a customer to create a single use digital card to be provided to websites that you simply don’t want to have your real card information. The idea is far from novel, and in fact Paypal themselves offered the product in the mid-2000s. However, what is interesting about the product is how some have suggested it be used.

Gaming Credit Card Rewards
On the travel reward site Doctors of Credit, we can get our first glimpse of how the product could be used to ‘hack’ the credit card reward systems that allow customers to specify an online spending reward category. The author suggest that a user could generate a Paypal Key number to essentially allow the use of a Paypal account on a website that doesn’t allow Paypal and therefore capture the Paypal category reward for more common purchases. For example, Discover ran a 5% reward category on Paypal transactions late last year, and other major credit card providers could be looking to run similar promotions in the fourth quarter of this year. In this scenario, the user could create a Paypal Key virtual number and use it across all purchases to drive spend to that category and max out the reward. Additionally, the user would also get the points on the underlying credit card being used within their Paypal account and essentially double dip. This isn’t likely to blow up the business model of any major bank, but it does present an interesting way to game the system.

Gaining Traction at Point of Sale
Even more interesting is how Paypal could potentially be used at a physical Point of Sale (POS) by adding the Paypal Key number to Google Pay. Paypal does confirm on their own support site that the feature works with Google (and not Apple Pay or Samsung Pay), but it is still unknown if that is only for online purchases or if a physical POS purchase would be possible. If supported, this could be an additional piece of how Paypal plans to eventually target physical POS acceptance once again. By using the virtual card number in a digital wallet and then handling the account routing on the back-end, Paypal does not need special point of sale integration to enable their users to make purchases at physical point of sale. In addition to the recently announced QR codes that will likely work on Apple devices, a Paypal virtual card number in a Google wallet would further distribute the ability for a Paypal account to be used at physical point of sale.

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