Apple and PayPal started talking early on in Apple’s development
of Apple Pay, as Apple was setting up partnerships with the card
issuing banks and card networks. Since PayPal’s a payments
industry leader, it would have been shortsighted for Apple to not
reach out to PayPal.
But while these talks were going on, PayPal went ahead and
partnered with Samsung on the Galaxy S5 fingerprint scanner, a
move that was reportedly forced onto PayPal by eBay CEO John
Donahoe. PayPal’s now-former president David Marcus was
purportedly categorically against the Samsung deal, knowing that
it would jeopardize PayPal’s relationship with Apple. Donahoe won
the day, however.
Apple was said to be absolutely furious that PayPal did the deal
with Samsung, which led Apple to cut PayPal out of the Apple Pay
process entirely. (One source said: “Apple kicked them out of the
door.”) This dust up with Apple was a big reason that David Marcus
ended up leaving PayPal for Facebook.