How PayPal missed huge Apple Pay deal because of the Galaxy S5

One of the most important products Apple unveiled during its iPhone 6 event is Apple Pay, the company’s official foray into mobile payments. Apple secured deals with the most important card issuers and banking institutions in the U.S. ahead of the keynote, but surprisingly left out one payments company that was rumored in the days preceding the announcement to be working together with the iPhone maker. Bank Innovation, which provided many details about Apple Pay long before its official name was revealed, has found out more details about Apple’s negotiations with PayPal, and why it kicked it out of the Apple Pay business.

Apparently, the Apple-PayPal talks were “massive,” but everything fell apart the moment Apple found out that PayPal also partnered up with Samsung to offer fingerprint-protected mobile payments to some Galaxy users.

Apple and PayPal talks started early in Apple Pay development, as the iPhone maker reportedly wanted to have PayPal, “a payments industry leader,” on board for its contactless payments launch.

However, during these talks, PayPal and Samsung made official their own partnership (in early 2014 when the Galaxy S5 was unveiled), making Apple “absolutely furious.” Subsequently, “Apple kicked [PayPal] out of the door,” according to a source familiar with the events, and launched Apple Pay without PayPal integration.

Bank Innovation also reveals there was some internal conflict at PayPal about the Apple deal. eBay CEO John Donahoe pushed for the Samsung deal even though PayPal president at the time, who left for Facebook following the Apple-PayPal deal collapse, David Marcus was “purposely categorically against the Samsung deal, knowing that it would jeopardize PayPal’s relationship with Apple.”

As soon as Apple Pay became official, PayPal took quick hits at Apple regarding user security, although the company’s attack was cleverly debunked by a former PayPal exec soon after that.

Meanwhile, eBay announced it plans to spin off PayPal next year, and a deal with Apple would have been even more important for PayPal’s future valuation.