The agreement gives PayPal greater reach in stores and is much like the recent deal PayPal reached with Visa.

(Bloomberg)—PayPal Holdings Inc. and MasterCard Inc. will end years of squabbling between the companies with an agreement announced Tuesday to give PayPal lower fees and more reach in stores, while increasing MasterCard’s online payments volume and helping its mobile-payments initiative.

The deal, announced Tuesday, is another step toward resolving PayPal’s sometimes-strained relationship with credit card giants, as the two sides have fought for control over online and in-store transactions. It’s similar to an agreement PayPal inked with Visa Inc. in July that sent PayPal shares tumbling nearly 10% as investors worried about a lack of clarity regarding higher transaction costs.

PayPal CEO Dan Schulman has shown a willingness to negotiate with credit card issuers to resolve long-standing disagreements with hopes of boosting his company’s visibility offline, where most transaction still happen, and to remove the threat of higher fees on digital wallet transactions. It will also put the company on better footing as PayPal faces competition from Apple Inc.’s Apple Pay and Google parent Alphabet Inc.’s Android Pay.

“With each partnership agreement that we sign, we further expand the ubiquity and value of the PayPal brand and improve our own economics,” Schulman said in a statement announcing the agreement.

Agreement terms

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As part of the MasterCard agreement, PayPal will no longer encourage users to link their PayPal profiles directly to their bank accounts, which charge lower fees for transactions than credit and debit cards. Known as “ACH steering,” the practice presented a threat to credit card issuers like Visa and MasterCard as consumers increasingly shop online and use PayPal instead of credit cards.

PayPal also agreed to share more data with MasterCard regarding PayPal transactions linked to MasterCard accounts, which is important for fraud prevention and rewards programs. MasterCard’s mobile wallet, MasterPass, will also be a payment option for services like Uber, AirBnB and other merchants using PayPal’s platform for mobile devices, known as Braintree.

In exchange, PayPal will no longer be subject to MasterCard’s “digital wallet operator fee,” imposed in 2013 to penalize mobile wallet platforms for not sharing data. PayPal’s U.S. customers will also be able to make payments at 5 million locations that use MasterCard’s mobile payments technology. And PayPal customers will be able to instantly cash out account balances on MasterCard debit cards.

Fight for control

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Acrimony between PayPal and credit card issuers had escalated as PayPal grabbed an increasing number of transactions, and as credit card issuers expanded into PayPal’s turf with their own online payment and digital wallet options. The MasterCard and Visa agreements highlight how multiple companies can share a small slice of each transaction, either as the payment method chosen by the consumer or the platform used by the merchant.

Schulman in April said the price gap had narrowed for payments where PayPal was linked to a bank account versus a credit card, and that the bank-linked transactions carried greater risk. While PayPal will sacrifice the cost advantage of bank account-linked transactions, it has struggled for years to make the transition from an online payments button to an in-store option.

PayPal will use MasterCard’s tokenization service, which swaps cardholder information such as account numbers with a unique set of numbers that validates a customer’s identity to discourage online data theft.

The Visa deal earlier this year was received poorly by investors, who worried about the near-term cost implications of PayPal paying higher fees to process more transactions over the more expensive Visa network. The day after the deal was announced on July 21, the shares fell 6.8% and have yet to recover.

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