ne of the largest payment processors in the country, Paymentech LP, has entered into partnerships with a pair of companies not typically associated with large transactions. Paymentech will offer PayPal's online payment service to its merchant customers beginning early 2005. It also finalized a multi-year contract to process cre-dit and debit transactions for all Pepsi-Cola North America vending machines equipped to accept card payments.

As consumers migrate from cash to various forms of plastic as the preferred way to make purchases, Paymentech sees the newly forged partnerships as strategic forays into new areas. The company hopes that the partnerships will serve as springboards for future business by leveraging PayPal's 56 million worldwide accounts and Pepsi's commitment to expanding cashless options in its vending sector. Pepsi's annual revenues are $4 billion.

Paymentech spokesperson Laura Lambeth said that the PayPal partnership will give Paymentech's merchants the ability to offer their own customers more payment prerogatives. Paymentech currently pro-cesses more than half of all Internet transactions; integrating PayPal's payment methods increases the options available to consumers, Lambeth said.

Paymentech doesn't see PayPal as a competitor, she said; Paymentech's customers are businesses, PayPal's customers are consumers. Mer-chants will still process payments made using credit, debit and stored value cards and electronic checks, but their customers will also be able to choose PayPal as its own branded payment option. Through the exclusive agreement with Pepsi, Paymentech will process payments that customers initiate by swiping their credit or debit cards at cashless-enabled vending machines. Pepsi has several hundred of these machines installed in such high-traffic areas as malls, hotels, convention centers and casinos.

Paymentech forecasts growth in this market in the coming years as consumer use of payment cards, even for purchases of small amounts, increases. Paymentech and its Canadian affiliate processed 7 billion transactions in 14 currencies worth $162 billion in 2003.