Following a similar agreement with Visa, PayPal has struck a deal with MasterCard that will help the e-commerce specialist step up its attack on the bricks-and mortar market.
Coming weeks after PayPal and Visa embarked on a "new path", the MasterCard deal marks a new strategy for the card giants and their long-term digital rival.
Under the new arrangement, MasterCard will be presented as a "clear and equal payment option" and PayPal will stop encouraging Visa cardholders to link to a bank account via ACH, a cheaper option for PayPal.
Consumers and small businesses will be able to instantly cash out funds held in their PayPal accounts to a MasterCard debit card, while Masterpass will be offered as a payment option for Braintree merchants.
In exchange, PayPal will expand its presence at the point-of-sale by tapping MasterCard tokenisation services. This will allow customers to use their tokenised MasterCard in their PayPal Wallet to make in-store purchases at the more than five million contactless-enabled merchant locations across the globe.
The former eBay unit also gets "certain financial volume incentives" and will no longer be subject to the digital wallet operator fee.
Dan Schulman, president and CEO, PayPal, says: "MasterCard has been a trusted partner for many years. By collaborating and innovating together we will continue to help move digital payments forward and improve payment experiences for our mutual customers."
Ajay Banga, president and CEO, MasterCard, adds: "The expansion of the partnership with PayPal further reinforces our commitment to our billions of cardholders across the globe to provide them the choice to pay when, where and how they want while delivering the simple and secure payment experience they’ve come to expect from MasterCard."