PayPal Looks to Bridge Cash, E-Commerce Gap with New Reload Card

A new PayPal-branded prepaid product introduced Thursday provides consumers the ability to convert cash into online funds without using a traditional bank account or payment card.

The PayPal My Cash Card is a private-labeled, single-use reload token developed with the Atlanta-based prepaid card and technology provider InComm. It can be purchased in denominations ranging from $20 to $500 at more than 30,000 retail locations of five pharmacy and dollar store chains in the U.S.

"We are systemically attacking all of the points where bridges need to be made, connecting the cash economy to the online economy," says Patrick Gauthier, the head of product strategy for San Jose, Calif.-based PayPal. "The reload token really has one single purpose, to be able to deposit cash into your PayPal account. It's like an ATM where you can deposit cash."

There is a $3.95 fee to purchase the card. After a consumer purchases a token, she then goes online and types a PIN from the back of the card. The PIN can be used immediately after the card is activated to deposit funds into the user's PayPal account.

"Cash is still a significant method of payment in the U.S. and represents more than one-third of all payments in the U.S.," Gauthier says. "But you can't push your $5 bill into the computer."

The new token serves the fundamentally same purpose as Green Dot Corp.'s MoneyPak, which consumers can use to add funds to a Green Dot prepaid card. MoneyPak can also be used to fund PayPal accounts and pay bills. But while the MoneyPak token is distributed mainly through Walmart stores, "the agreement with InComm lets us distribute to a much broader set of merchants," Gauthier says.

"It brings us to the physical space, allows us to bridge cash and online and allows us to reach the underbanked in the easiest way to reach them," he adds.

Gauthier didn't rule out a future expansion of this strategy, including the potential to distribute a reload token through prepaid vendor Blackhawk Network, the Safeway subsidiary that's developed a strong prepaid distribution in grocery stores.

"We're looking at covering the key categories that consumers can get a prepaid card or a reload token. Those categories are generally all of the stores you can think of in everyday spending," he says. "We will continue to expand into those categories because that's where the consumers are."

One key difference between the experience with the new token and the existing MoneyPak card is how users reload their PayPal account. With MoneyPak, users log on to their PayPal account to activate the token. But with My Cash, users activate the token on a new website, paypal-cash.com. The separate website was necessary to facilitate the integration between its system and InComm's technology, Gauthier says.

"Over time, all of those activities will converge into paypal.com and more importantly, into the PayPal app, since our strategy is very clearly mobile first," Gauthier says. "All of those services over time will be accessed through a single point."

As the product expands, PayPal plans to make the token reusable. Gauthier says PayPal's reload tokens, prepaid card offering with NetSpend and its partnership with Coinstar are all driving greater functionality for both online and offline commerce, includes providing ways to use PayPal accounts to make purchases at retailers.

"We are very proactively addressing and positioning ourselves in a world where the differences between online and offline and increasingly blurry," he says.