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PayPal Strikes Partnership With Visa

The online-payments provider has struck a deal with Visa Inc., V -0.72 % announced Thursday by the two companies, that will make paying with PayPal an option when people pay in stores with their smartphones.

It also will now be possible for users of PayPal’s popular mobile apps, including Venmo, to instantly withdraw money they get through the peer-to-peer payments service if they link it to their Visa debit cards.

The deal ends a year of tense negotiations between the firms and removes uncertainty for PayPal about the fees it pays Visa, with higher fees being a major threat to its profitability.

It also helps PayPal move beyond what helped it first revolutionize internet payments in the 1990s—providing an online alternative to cash and credit cards—to what it hopes is a bigger role in the system, serving people and businesses that use Visa or any other payment tool everyday.

“This is a new PayPal, one that is actively partnering across the digital payments landscape,” Chief Executive Dan Schulman told analysts.

In an interview, he added: “We want customers to pay any way they want, and the deal with Visa allows us to move more aggressively into the store.”

The shift, which Mr. Schulman called “fundamental to long-term growth,” is investors’ strongest indication of PayPal’s direction as an independent company. Last year it was split off from eBay Inc., where it focused on helping buyers pay sellers in the online marketplace, as part of a plan to unlock more...