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PayPal Idea Proposal (PYPL)

PayPal Idea Proposal (PYPL)
 

Will PayPal’s acquisition of iZettle give it critical momentum to boost in-store use?

Report Available: June 28, 2018

 

Blueshift’s initial research found PYPL making a major acquisition that could increase its presence in physical stores. The company continues to make gains with is peer-to-peer payment app but faces stiff competition from a bank-backed platform. PYPL continues to deliver impressive results but the competition is ramping up, as evidenced by EBAY’s decision to drop PYPL as its primary payments processor.

 

Observations

  1. PYPL announced its biggest acquisition ever last week with its $2.2 billion purchase of iZettle. The Swedish financial technology firm offers a similar service to SQ with its miniature credit card readers that allow small businesses to accept payments on smartphones or tablets. PYPL hopes the acquisition will help it move beyond online transactions and into physical stores, where it has struggled to gain traction despite years of efforts. iZettle, which has a major presence in 12 countries in Europe and Latin America, expects to process about $6 billion in transactions this year.
  2. Alongside its efforts to gain a presence in stores, PYPL is working to monetize its peer-to-peer payment app, Venmo. PYPL has started allowing consumers to use their Venmo balances to make purchases at online retailers that already accept PYPL. Venmo transaction volume was up 80% in Q1 to $12 billion. But even as Venmo ramps up, a new competitor backed by a consortium of major banks is lurking. Zelle, with support from JPM, WFC, BAC and others, has shown some promising early results.
  3. In the meantime, PYPL continues to hum along on the strength of online payments and merchant processing. Q1 revenue rose 24% year-over-year, led by a 35% increase in net new active accounts and 32% growth in total payment volume.Merchant services volume grew 30% in the quarter.
  4. Despite its impressive run of growth, competition in the payment field continues to be red-hot. In January, PYPL’s former parent company, EBAY, announced it was cutting off PYPL as its main payments processor and transitioning to a smaller, European-based competitor, Adyen. PYPL executives said they will continue to be a payment option on EBAY through 2023 and that the transition does not change their short- or medium-term outlook. PYPL and its merchant services subsidiary Braintree continue to fight for market share with Stripe, while AMZN lurks as a threat in mobile payments.
  5. Blueshift’s Sept. 18, 2017, report found no signs that PYPL’s momentum was waning and highlighted several enormous avenues for further growth. Sources said PYPL was gaining traction in merchant services and payment processing through its own brand and its Braintree subsidiary. Venmo was identified as one of PYPL’s most exciting growth opportunities, though the competition with Zelle was expected to be fierce. Sources said PYPL was likely to struggle to become an in-store payment option as brick-and-mortar shoppers are not demanding it, and even mobile phone systems that are faster and easier to use are not gaining traction in stores.

 

Will the iZettle acquisition help increase in-store use of PYPL? Can iZettle take share from SQ in the U.S.? Will Zelle slow Venmo’s growth? What kind of traction will PYPL get in its efforts to monetize Venmo? Will EBAY’s switch to Adyen have any medium- or long-term impact on PYPL? To answer these and other questions, Blueshift will gather data and issue a market research report from independent sources in the following areas: Online retailers, Physical retailers, Payment technology developers, and Industry specialists.

 

Companies: PayPal Holdings Inc. (PYPL), Amazon.com Inc. (AMZN), Bank of America Corp. (BAC), eBay Inc. (EBAY), JPMorgan Chase & Co. (JPM), Square (SQ), Wells Fargo & Co. (WFC)

 

Research Begins: June 4, 2018

 

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