Is Starbucks Cooling off PayPal? (Update 1)

Updated from 12:20 p.m. EST to provide analyst comments regarding the deal in the third paragraph.

NEW YORK (TheStreet) --Starbucks (SBUX) and Square teamed up to bring Square's services to Starbucks locations, but there's just one issue. Starbucks already has a relationship with PayPal.

PayPal, owned by eBay ( EBAY), is already used in Starbucks' mobile app. Customers can also add their credit cards to the app should they wish to pay with this option as well.

Morgan Stanley analyst Glenn Fodor opines that this deal might be "mixed to negative" for PayPal, as the future of the relationship between the two companies remains murky. "This could have been a great partnership for PayPal/PayPal Here," Fodor wrote in the report. However, he does mention that it would take a while for for Square to take a "PayPal-like 'ach'" strategy (ACH stands for automated clearing house).

"Furthermore, if PayPal's experience is any indication, it takes a long time to transition consumers off the 'rewards-oriented' rails of traditional networks," Fodor noted in his report.

PandoDaily reports that Starbucks actually approached Square after rejecting every other mobile payment player. The article doesn't mention PayPal by name, but Starbucks' new deal with Square could affect its relationship with PayPal.

Shares of eBay are off 1.6% in late Wednesday afternoon trading to $44.88, while shares of Starbucks are close to flat at $45.31.

Interested in more on eBay? See TheStreet Ratings' report card for this stock.

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-- Written by Chris Ciaccia in New York

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