The biggest surprise of the year in the world of alt-payments is PayPal’s newfound reach into banking circles as evidenced by their agreements with S1, FIS, and FirstData announced at last week’s Retail Delivery conference.

But a huge question remains: Will banks play ball with PayPal or will they provide the same functions via home-grown solutions or non-PayPal alternatives such as CashEdge, Fiserv, or Visa/MasterCard?

I don’t think anyone has that answer yet. There are simply too many variables. But if you believe there’s no way a bank would use a “powered by PayPal” solution, read this quote by Mercantile Bank of Michigan’s CIO, who plans on launching the S1/PayPal person-to-person mobile service next year (note 1):

“(PayPal) is a network, it doesn’t scare me at all. They’re never going to steal significant deposits out of our bank and keep [them] in PayPal accounts. Visa and MasterCard probably look at PayPal as the enemy, and they probably should, but that’s their problem, not mine.”
   — John Schulte, CIO Mercantile Bank of Michigan in a
       Nov. 10 article from Digital Transactions

Note:
1. You might remember Mercantile Bank from our May post lauding its fee-based consumer positive-pay service.