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PayPal and Visa Make Up, on Visa’s Terms

The two companies have resolved their long feud with a wide-ranging agreement. But the terms of the deal reflect Visa’s superior bargaining position as the owner of crucial payment infrastructure.

What PayPal gains is access to Visa’s contactless mobile checkout technology. In the near future, customers will be able to use a PayPal or Venmo wallet on their smartphones to pay for purchases at millions of physical stores across the U.S.

But in return, PayPal must make a big change to its fundamental business model. Currently, its users can link their PayPal accounts to a bank account or to a credit card. The company encourages them to do the former, because it allows them to dodge the steep fees...