Thursday, August 23, 2012 at 1:52 am.

What’s The Difference Between PayPal’s Discover Deal And Square’s Starbucks Partnership?

Lots of comparisons — some logical, some silly — between the two. It’s definitely a good move for PayPal, but I’m not sure how this “trumps” Square (All Things D) or will “outdo” Square (VentureBeat). They’re pretty different.

PayPal & Discover

  • Starting next year, merchants will be able to accept PayPal charge cards, if you have one of those. Or if they have the right hardware, you’ll be able to type in your phone number and PIN to pay.
  • This is potentially cool because you could pay for something without a phone, wallet, or credit card, if that’s something you’d need or want to do…
  • If it works, might convince people to funnel some offline spending through PayPal, which currently seems like a strange idea. Might convince merchants to use more of PayPal’s services.

Square & Starbucks

  • Starting this year, you’ll be able to “pay with Square” at U.S. Starbucks stores, via a barcode in the Square mobile app. (If that’s something you find easier than pulling out a card.) Square funnels the payment through your existing credit or debit card. Square will also process all back-end U.S. credit and debit transactions for Starbucks.
  • This is potentially cool because Starbucks and Square could broaden their partnership to include more interesting Square features, such as paying with your name/”tab” (if your phone is with you) or future features.
  • If it works, might convince other big retailers to accept Square, might encourage people to download Square app, might help Square build a better “OS for merchants” or get acquired.

Anyway, they’re pretty different implementations, both with significant opportunities and challenges. (And messy overlap! Will be interesting to see if Square also supports the PayPal card via its Discover relationship. Or if it starts is own direct-to-your-bank, PayPal-like digital wallet.)

But the big idea seems to be that these two companies both want to become a sort-of “OS” for retailers, starting with a role in transactions. (Also: analytics, marketing stuff, etc.) And they both want to become a consumer-facing payments option, competing to varying degrees with the banks and credit card companies they also do business with.

PayPal’s advantage is its existing customer base and brand awareness. Square’s is its superior design and taste, creativity, and maybe better software. Let’s see who executes.

Still: Mobile Payments Are A Mess