Wells Fargo to handle credit cards for PayPal

Wells Fargo & Co. and PayPal Inc. have entered into a two-year agreement in which the California-based bank will handle all of the online bill payer's credit card transactions.

Wells Fargo will use a proprietary system it built in-house to process the transactions, said Debra Rossi, executive vice president for Wells Fargo Business Internet Services. She said she couldn't divulge the technical details of the system, which the bank began building when it first started handling online credit card transactions in 1995.

In addition, Wells Fargo will also bring its "risk management database" to the partnership as well to help battle online fraud, the company said in a statement.

Rossi said the company started collecting "bads and goods" a few years ago and now has a large database full of "bad cards, bad sellers and bad buyers." In addition, the company knows who the "good" people -- those who follow through on transactions -- are, she said.

U.S. Bancorp Piper Jaffray analyst Andrew Collins said this is a good deal for Wells Fargo.

Since Wells Fargo backed out of the Billpoint deal with eBay Inc. earlier this year, the company has needed another route to maintain its position online, Collins said.

"Wells is trying to keep their leadership position in terms of the banks in the Internet space," Collins said.

Rossi wouldn't say how much PayPal is paying the bank for its services, except to call it "competitive."

A PayPal spokeswoman said the company couldn't comment on the arrangement with Wells Fargo because it is currently in a blackout period. PayPal has asked the Securities and Exchange Commission (SEC) for permission to make a second offering of stock. The SEC hasn't made a decision yet, but PayPal expects to be able to set a stock price at the end of the month.

Earlier this week, PayPal entered into an agreement with United Parcel Service Inc., as well. Under terms of that deal, UPS digital shipping tools will be built into PayPal's online payment process -- allowing sellers to print shipping labels and buyers to get an e-mail with a tracking number.

Copyright © 2002 IDG Communications, Inc.

7 inconvenient truths about the hybrid work trend
Shop Tech Products at Amazon