Mastercard-PayPal agentic AI pact shakes up e-commerce

• Key insight: PayPal and Mastercard are partnering to scale agentic AI-powered payments.
• What's at stake: Powering shopping and checkout for hundreds of millions of consumers and tens of millions of merchants.
• Forward look: The two firms will collaborate on future agentic AI projects. 
  

Mastercard and PayPal's strategies to use new forms of artificial intelligence are getting a major push through a collaboration designed to dramatically scale the technology.

Under an expanded partnership announced Monday, Mastercard's Agent Pay will integrate with PayPal's branded checkout digital wallet. This will enable AI agents to complete transactions on behalf of PayPal users. Mastercard and PayPal will also collaborate in future uses for agentic AI in shopping and payments.

"Agent traffic is scaling rapidly," Richard Crone, a payments consultant, told American Banker. "This announcement increases the probability that Mastercard Agent Pay will actually be fully operational by Black Friday."

Mastercard's 'agents'

The Mastercard/PayPal collaboration comes as Mastercard plans to release Agent Pay, a program that generates personalized payment experiences to consumers, merchants and issuers. Agent Pay, which Mastercard is aiming to release for the holiday shopping season, expands Mastercard's existing generative AI technology, which enhances customer service, security and onboarding, generating automated responses to customers. 

Agent Pay accesses the card network's data and AI tools to help shoppers curate a mix of purchases for an event, aid merchants on supply chain management or help a retailer build a marketing or sales program.

At the same time, PayPal is rolling out its agentic commerce strategy, with travel being among the early uses. PayPal has partnered with Selfbook, a hospitality software company. Selfbook and PayPal are using technology from Perplexity, an AI-powered search engine, to support automated hotel searches, booking and payment.

Travel includes searching for hotels, often in unfamiliar cities with specified needs, such as size, pet-friendliness, proximity to shopping and other activities — and is usually planned and booked in advance on a strict time frame.

Within five years, bots will account for 70% of retail site traffic as consumers deploy multiple agentic commerce bots to manage search, purchase and post-sale activity, according to Crone's consulting firm, adding there will be four to 40 agents for every human on the planet by 2030, all requiring pre-authenticated, bank-grade know-your-customer credentialing to complete a purchase.

"In this case, Mastercard Agent Pay is riding PayPal's coattails for that validated entry to checkout scripts," Crone said. 

Given the expansion of agentic commerce, merchants' economics will shift, according to Crone. 

"For decades, site dwell time and human browsing drove discovery and monetization," he said. "Agentic commerce moves that upstream — off-site — reducing the value of journey mapping and shifting margin toward the agent networks."

Agentic AI refers to a new form of AI that enables shopping and payments, among other functions, with little or no human interaction. Agentic AI is becoming very popular in the financial services industry, with 70% of banks saying agentic AI will have a significant impact on banking nd 51% of banks saying they are piloting or deploying agentic AI, according to research conducted by American Banker on behalf of Soundhound.

Across all industries, investments in agentic AI are projected to total $7.28 billion in 2025, with growth in pace to reach $41 billion by 2030, according to the Mordor Intelligence Report. Writing for American Banker, Ava Labs President John Wu said AI agents "aren't just chatbots answering your questions or recommendation engines pushing playlists. These are proactive digital entities that can negotiate contracts, execute financial trades and manage all manner of business processes, often without direct supervision. The promise is enormous — but so are the risks."

PayPal did not comment by deadline.

"Mastercard is committed to enabling secure, seamless agentic payments at scale—and this integration with PayPal helps progress this vision," Adam Granoff, executive vice president of Global Partnerships at Mastercard, said in an email. "PayPal joins a growing number of digital commerce players adopting Mastercard Agent Pay standards, which are built on our industry-leading tokenization technology and aligned with EMVCo specifications. These standards are open to any ecosystem participant that meets the required security and technical criteria, ensuring consistent protection and transparency across platforms."

Mastercard's primary rival, Visa has partnered with technology firm Cloudflare to perform a similar function to Mastercard's PayPal collaboration.

Earnings on tap

Aaron McPherson, principal at AFM Consulting, told American Banker that the collaboration is aimed at ensuring that PayPal works well with the emerging Mastercard Agent Pay Acceptance Framework. That framework is a service that provides a secure token identifying the user of an AI agent and linking back to data about user intent. That allows merchants to weed out malicious bots from their site and have some assurance that the user meant for the agent to purchase a particular item.

"Essentially, the agent looks like a standard payment card token to the e-commerce site, but the token resolves to include additional information," McPherson said. "Therefore, it should work with existing checkout pages without requiring extensive programming."

The key to agentic payments will be the adoption of all payment types, according to Tony DeSanctis, senior director at Cornerstone Advisors.

"I envision PayPal integrating agentic token acceptance for all existing card types, as well as future payment types such as stablecoins, ACH, and any other payment methods made available in agentic shopping experiences," DeSanctis said. 

The PayPal/Mastercard announcement comes just ahead of both company's third-quarter earnings calls, with PayPal announcing earnings Tuesday morning and Mastercard on Thursday morning. PayPal is expected to post earnings of $1.19 per share, down 0.8% from 2024's third quarter, with revenue of $8.2 billion, up 4.5%, according to Zachs.

Mastercard is expected to post earnings of $4.31 per share, up 10.8% the prior year and revenue of $8.5 billion, up 15.4%, according to Zacks.