PayPal Inc. is one of the largest drivers of interchange revenue for the major card networks, yet the networks are increasingly trashing the security of the online payments powerhouse and other companies that toe the line between partner and rival.
Visa Inc. and American Express Co. executives harped on risk concerns around eBay Inc.'s PayPal, as well as the mobile carriers, at the Keefe, Bruyette & Woods Cards, Payments and Financial Technology Symposium in New York.
"They are a friend, but they are competition," said John Partridge, Visa's president.
In particular, the networks criticized PayPal's plans to allow its online payment system to be used at the physical point of sale.
Visa's V.me and Amex's Serve digital wallets compete with PayPal.
Amex is better suited to handle customer data, said Dan Schulman, Amex's group president of enterprise growth. "We already have the funds and fraud and risk engines," he said.
Visa echoed this concern.
"How will their fraud system work in real time when you are physically walking out of the store?" Partridge asked. A card "is something that I have physically and something I know well."
PayPal says it has the right level of experience in payments to secure point of sale transactions.
"We have a proven track record of delivering innovation, convenience and security to more than 100 million active PayPal users worldwide and millions of online merchants," said Anuj Nayar, a PayPal spokesman, in an email.
"With PayPal, your financial information can't be lost or stolen from your wallet, your card or on your phone," he said. "It's safer in the PayPal digital cloud than in your pocket."
The carriers are developing a mobile payment system, Isis, that could potentially compete with the card networks' initiatives. Like PayPal, the carriers seek to work with the networks, but they would also be handling the security of the transaction.
"The carriers want to do a lot … [but] they are not in the risk business," Schulman said.
But he did not rule out a partnership with any of the companies he criticized.
"It's very early innings right now in this digital game," he said. "It's way too early to establish bright lines as to who it will be a potential competitor and who might be a potential partner for us."