PayPal expanding to stores with Discover

PayPal, eBay's online-payment service with more than 50 million U.S. customers, will expand acceptance of its brand to "brick and mortar" stores nationwide in an agreement with Discover Financial Services.

PayPal customers will be able to use their accounts, either with cards or smartphones, at more than 7 million merchant locations that already accept Discover starting in 2013, the companies said.

The partnership gives Pay-Pal, which seeks to transfer its online success to the physical world, access to a network that reaches about the same number of U.S. merchants as Visa and MasterCard. Online purchases accounted for less than 8 percent of U.S. retail spending last year, and PayPal now can target consumers where they do most of their shopping, said Beth Robertson, an analyst at Javelin Strategy & Research.

The pairing also will drive more transactions to Discover's network, the fourth biggest in the United States after Visa, MasterCard and American Express.

EBay, the world's largest Internet marketplace, generated 40 percent of second-quarter revenue from PayPal, which had 113.2 million active accounts, the San Jose, Calif.-based company said last month. -- Bloomberg News