January 14, 2013

PayPal unveiled new deals with a chain of gas stations and a grocery store operator on Monday, as the payments division of eBay Inc tries to expand its service further into physical retail locations.

PayPal said it signed payment deals with Mapco Express, a unit of Delek US Holdings which runs more than 440 retail fuel and convenience stores, and Spartan Stores, which distributes groceries to more than 400 locations, including 97 of its own stores.

That helped bring the number of PayPal physical, or brick-and-mortar, retail partners to 23, including Abercrombie & Fitch, Home Depot and J.C. Penney.

PayPal, a leading online payments network, is trying to expand into the physical retail world, a much larger market. Gas stations and grocery stores are important partners for PayPal because consumers visit these types of retailers much more regularly.

"If they can penetrate those (categories) they can reach a significant majority of the U.S. population on a regular basis," said Sanjay Sakhrani, an analyst at Keefe, Bruyette & Woods.

PayPal is also working on agreements with drugstore chains, according to Don Kingsborough, the PayPal executive overseeing the physical retail push. He declined to identify which drugstores may be involved.

"You're not going to change where you get your prescriptions or get groceries or gas, so PayPal has to be accepted everywhere you shop," he said.

The partnership with Mapco uses QR codes, a type of barcode, on their gas pumps that are scanned using a smartphone.

The user selects with the smartphone how much gas they want to buy. Any loyalty card discounts show up automatically as the gas is pumped.

A loyalty program offering 30 cents a gallon off for gas would show up on the pump as $2.90 a gallon instead of $3.20, for instance. The payment is completed through PayPal on the smartphone.

Kingsborough said PayPal will have other partnerships with "major petroleum companies," but declined to identify specific companies.

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