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PayPal hopes to break shoppers' swiping payment habit in stores

SAN FRANCISCO -- PayPal will soon be ubiquitous in U.S. retail stores, but just being there may not be enough.

The online payment service will take a giant step beyond its Internet roots on April 19, when a partnership with Discover Financial Services officially kicks in. The deal means that, by the end of this year, PayPal will be accepted as a payment option in roughly 2 million retail stores that already take Discover credit cards.

For parent eBay Inc., PayPal's expansion is crucial. The 13-year-old payment service accounts for about 40 percent of eBay's revenue and its growth is slowing. A foothold in physical payments, a $10 trillion market roughly 10 times the size of online transactions, could power longer-term growth.

But a nagging question hangs over PayPal's push to checkout counters: how can it convince consumers to try its new payment method when swiping a credit or debit card is so easy?

"Consumers need to be convinced they need a single digital wallet or card that links to all their other cards," said Rick Oglesby, a payments industry analyst at Aite Group, which provides research to financial services clients. "That's a huge mindset shift and the average consumer wonders why they would need it."

PayPal has been testing its physical payments service at Home Depot Inc. stores since early 2012. At the checkout counter, shoppers can use PayPal by typing in a mobile phone number and a four-digit PIN that has to be set up online beforehand. They can also use a PayPal card that links to their account.

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