PayPal is teaming with credit-card company Discover Financial Services to expand use of the eBay Inc. subsidiary's nascent mobile-payments service from a few thousand merchant locations to potentially seven million by the middle of next year.

PayPal is teaming with credit-card company Discover Financial Services DFS +5.11% to expand use of the eBay Inc. EBAY +4.51% subsidiary's nascent mobile-payments service from a few thousand merchant locations to potentially seven million by the middle of next year.

The move could accelerate PayPal's efforts to transform itself from predominantly a tool for making online purchases to a viable option for making transactions in brick-and-mortar merchants, a market long dominated by traditional card-payments networks Visa Inc., V +0.35% MasterCard Inc., MA +0.56% American Express Co. AXP +0.18% and Discover.

PayPal and Discover on Wednesday announced the partnership, which will allow the credit-card company to equip its existing base of more than seven million U.S. merchants to accept PayPal as a payment method, in addition to plastic cards, cash and checks.

"Now we can do this at a scale that the consumer can adopt this and be able to use it every day in their life," Don Kingsborough, vice president of retail services for PayPal, said in an interview.