Apple Adds PayPal for E-Commerce. Will More Cooperation Follow?

While PayPal has not taken a firm position on whether it sees Apple's foray into payments as a competitive threat or potential partner, Apple's addition of PayPal as an option for its online stores suggests an openness to cooperate on basic functions.

While the move is most immediately a way for Apple to add transaction flexibility, said Richard Crone, a payments consultant, there are synergies that could benefit from deeper business partnerships. 

"It has been proven that when you add alternative payment types for online sales, you can reduce abandonment," Crone said, adding there is there is little doubt that Apple and PayPal could entertain ideas of "working together to conquer the market in the same way Visa and MasterCard do it today."

Any growth in PayPal also helps Apple Pay, and any growth in Apple Pay helps PayPal in the future because merchants are likely to accept both and it strengthens mobile payment as an option, Crone added.

"PayPal has created a very loyal following of some 152 million users as a payments facilitator," Crone said. "As a retailer, Apple wants that."

While Apple and Alibaba have strongly suggested cooperation, PayPal's position among the three giants is less clear as PayPal's public response to Apple's expansion has been mixed.

When Apple first revealed Apple Pay, PayPal wasted no time in taking shots at the electronics giant's security role in a breach that leaked celebrity nude photos.

Since then, PayPal has softened that stance, and chief executive John Donahoe has hinted that the door would be open for relationships with Apple beyond payment acceptance. And when EBay announced in September it would spin off PayPal as a separate company, it was generally viewed as a way for PayPal to more easily establish new partners and revenue streams.

Apple did not respond to inquiries about the online retail channels and PayPal said it could not address the topic at this time.

PayPal and Apple already cross paths in the mobile payments world with provider Braintree, a unit of PayPal, incorporating Apple Pay into its payment processing. Braintree was quick to inform its merchants that Apple Pay would work through Braintree if they included the option in their apps.

And even if Apple and PayPal see each other as rivals, there will almost have to be some cooperation, analysts said.

"Apple is first and foremost a customer-oriented company, so what’s good for their customers is good for them," said Zil Bareisis, a senior analyst at Celent. "Rivalries aside, PayPal is a widely popular payment method, so I am not surprised that Apple is enabling its acceptance."

Adding PayPal acceptance will primarily benefit Apple by adding more customers, said Richard Oglesby, a senior analyst for Double Diamond Payments Research, adding that while the latest cooperation does not mean things between the two companies have cooled off, he expects Apple and PayPal to work together at some point.

"PayPal’s value proposition is pretty strong when it comes to completing Web purchases, and as a payment brand it has very strong online acceptance and consumer utilization," Oglesby said. "Apple has made a business decision that makes sense — leveraging PayPal where its offerings are the strongest."