eBay Inks Deal with NCR

In order to further expand its mobile payment business, e-commerce service provider eBay Inc’s (EBAY - Analyst Report) PayPal has signed a deal with NCR Corp (NCR - Analyst Report).

NCR specializes in point-of-sale (POS) technology and hardware and its customer base includes 38% of the top 100 U.S. restaurant chains and 50% of the major retail chains.

Under the partnership, PayPal mobile service will be integrated with NCR's POS technology, enabling customers to pay their bills at restaurants using a smartphone. Additionally, PayPal’s mobile payment options will be integrated into a couple of more NCR product offerings, including NCR’s Convenience-Go (C-Go) app for gas stations and convenience stores. This will allow shoppers to buy fuel and food, and pay for car washes using their smartphones.

Getting PayPal’s mobile services accepted in places like restaurants, gas stations and convenience stores will considerably increase the company’s mobile payment volume going forward. The NCR deal will increase PayPal’s addressable market, improving PayPal’s competitive position against rival mobile payment systems such as Google Wallet, Isis, Square and others.

This week, PayPal unveiled similar agreements with a chain of gas stations and a grocery store operator. PayPal’s point-of-sale technology is gaining a lot of traction as the company has already established partnerships with 23 reputed brands, of which 12 have agreed to accept PayPal as a payment mode. Last August, the company signed a deal with Discover Financial Services, enabling PayPal users to make payments at retail stores and thus extending its services to 7 million merchant locations.

As smartphone migration continues, eBay is seeing great opportunities in the mobile space. PayPal’s installed base includes 117 million accounts worldwide and it expects to process $10 billion in mobile payments this year.

Aided by growth in its PayPal business and mobile commerce, eBay recorded a strong quarter with earnings of 49 cents exceeding the Zacks Consensus Estimate. eBay’s PayPal remained the star performer, generating total payment volume (TPV) growth of 2.1% and 20.1%, respectively from the previous and year-ago quarters.

We believe that eBay is taking all the necessary measures to ensure continued growth in mobile payment in the near future. Both Payments and Marketplaces are showing improving trends compared with the year-ago quarter, indicating its changing business profile.

Though eBay’s payment business shows great promise, competition may be expected to pick up as banks and other companies announce their own payment systems and Google Inc’s (GOOG - Analyst Report) digital wallet gathers steam.

Currently, eBay shares carry a Zacks Rank #2 (Buy).