PayPal has struck an agreement with Discover Financial Services that will make its mobile payment service more widely available in the US. Shoppers will from April next year be able to use either their mobile phone or a payment card linked to their PayPal accounts to make purchases at those store locations which accept the Discover credit card.

The new relationship is a boost for PayPal which currently has agreements with 16 retailers in the US to accept payments. Although accepted in less locations than Visa and MasterCard, Discover says it does not lag that far behind. It claims to have 95 percent coverage compared to its two higher profile rivals. Discover is accepted at more than seven million locations in the US. PayPal and Discover may also look at expanding the agreement internationally.

However PayPal says it is unlikely to reach similar mobile payments agreements with Visa or MasterCard. 

Comparisons are being made with the Starbucks and Square deal from a fortnight ago. Analysts commented that the latter deal was a blow for PayPal. This announcement swings attention back to PayPal but actually the two deals are very different.

From next year, Discover’s merchants will accept payments made by customers who enter their mobile number and an additional PIN or use a PayPal charge card. The company will launch the card fbefore the mobile payment option. Merchants will also be able to offer additional PayPal services such as the ability for customers to order online and then pick up a purchase at the store.

PayPal already offers payment cards but according to Reuters will issue new ones to its more than 50 million active users in the US.

The merchant upgrade for the service will be straightforward says PayPal because it already has partnerships with the leading point-of-sale hardware vendors.

For its part, Discover will receive a cut of each PayPal transaction made using the credit card’s network. The deal is not exclusive but as stated earlier it appears unlikely either party would strike a similar deal with anyone else.

This is not the first partnership for Discover in mobile payments but it is the most significant. Discover last week announced it would enable its users to save their credit card directly into the Google Wallet. And last year it announced that it would work with Isis, the mobile payments service backed by three mobile operators.