PayPal is tightening its integration with bricks-and-mortar retailers CVS and Rite Aid by expanding a two-year-old cash loading service to the PayPal application for the iPhone.

Consumers seeking to replenish money in their PayPal accounts may now visit CVS and Rite Aid pharmacy locations, where they can pull up the PayPal mobile app and add physical funds without needing to visit an ATM or banking institution. This will enable the payments platform to strengthen its presence in the bricks-and-mortar retail industry, which could give it an advantage over its digital-only competitors.

“PayPal is broadening its offering to increase usage across demographics and it appears that this is its attempt to reach the under- un-banked segment,” said Thad Peterson, senior analyst at Aite Group, Atlanta. “It would appear to be a way for consumers to add value to a PayPal account independent of other payment alternatives like a DDA or a credit card.”

Quick reloading
PayPal’s latest app update includes the PayPal Cash feature, which allows users to add cash to their current balances at any CVS or Rite Aid store. Consumers must visit the mobile wallet and press the “Add To” button to instantly add funds to any transactions being made via smartphones.

This tool is currently accessible for United States accounts only.

The service may appeal widely to unbanked customers – that is, individuals who may not belong to a particular financial institution but would still like to add cash into digital accounts. The ability to walk into a Rite Aid or CVS, which maintain massive bricks-and-mortar footprints, and have an ATM-like transaction is likely going to appeal to some shoppers.

Furthermore, this integration means that PayPal is expanding its own digital footprint to reach more consumers in stores, effectively bridging the physical and digital worlds.

The app update comes two years after PayPal’s rollout of My PayPal Cash cards, which allow customers to undertake the same action, only with a physical card purchased in one of many participating retailers. Individuals seeking to take advantage of that service must log into their PayPal accounts via their mobile devices and choose the “Add Money” option in the navigation bar. PayPal CASH should be selected afterwards.

Once the retailer of choice has been indicated on the mobile site, users will be informed that a $3.95 service fee will apply for each transaction.

After the “Continue” button is clicked, PayPal will generate a dollar amount range that customers may choose from, to denote the final amount they would like added into their accounts. These amounts typically range from $20 to $500.

Next, users are asked to select how they would like to receive the link needed to create a unique bar code. It can be sent via SMS, email or mobile phone.

Consumers must then present the bar code to the cashier, who will scan the shopper’s smartphone to complete the transaction and accept the cash amount.

Each bar code has a one-time use, and expires within an hour of creation.

“Based on the information on the Web site, it’s a complicated process that involves a series of steps on either a smartphone or a computer to obtain an authorization bar code, and then a visit to a CVS pharmacy to provide the cash and load the account,” Mr. Peterson said. “Also the $3.95 load charge seems very high, as I wouldn’t assume that users of this offering would be depositing larger sums into their account using this process.”

Targeting mobile users
PayPal has long been attempting to entice mobile users, especially digitally-savvy millennials, to use its payment platforms over those of a competitor.

PayPal’s peer-to-peer payment platforms such as Venmo and PayPal.Me have seen significant user adoption already, with Venmo’s payment volume clocking in at $1.6 billion in 2015’s second quarter, suggesting that these types of mobile services are an important road forward for the brand (see story).

However, PayPal My Cash cards may prove to be divisive for its clientele. Some consumers will likely find great value in the service, especially if they frequent convenience chains and enjoy having their PayPal accounts well-stocked.

Others may find the $3.95 service fee too high to bother trying the service, which may propel other financial brands away from introducing a similar feature.

“I don’t envision that this will be something that PayPal’s competitors will be racing to replicate,” Mr. Peterson said. “The audience for this is limited, and the process is complex and expensive.”

Final Take
Alex Samuely, staff writer on Mobile Commerce Daily, New York