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PayPal Idea Proposal (PYPL)

PayPal Idea Proposal (PYPL)
 

Now that PayPal has crossed the $100 billion mark in quarterly payment volume, can it continue to outpace expectations or are there threats on the horizon that will slow its growth?

 

Report Available: September 7, 2017

 

Blueshift’s initial research found PYPL continuing its impressive rate of growth in revenue, platform volume, and new customers. The company is trying to keep the momentum going through increased flexibility for users, new partnerships with other payment players, and monetizing its social media payment system. Flexibility for users, however, could hit PYPL’s margins; its take rate is declining as Venmo transactions grow; and AMZN presents significant challenges.

 

Observations

  1. PYPL has surpassed analyst expectations every quarter since being spun off from EBAY in 2015. In Q2, revenues grew 18%, total platform volume topped $100 billion for the first time, and the company added 6.5 million new accounts to hit 210 million.
  2. Company executives said the rollout of “Choice,” which gives users more options and control over the payment method used during PayPal transactions, has increased engagement and reduced churn. The company will be rolling it out in new territories, including Japan and the U.K., later this year. There is some risk, however, that the Choice program will encourage users to choose funding methods that are less profitable for PayPal.
  3. The company is also trying to monetize Venmo, its peer-to-peer payment system. Venmo processed $8 billion of total platform volume in Q2, up 103%. Such transactions do not currently generate any revenue. As a result, PYPL’s “take rate” – the percentage of revenue the company records per transaction – fell again during Q2. The company is working on a system to allow users to pay merchants directly from money stored in their Venmo wallets, transactions from which PayPal would take a cut.
  4. A key part of PYPL’s recent strategy has been to partner with companies that have long been seen as competitors. In the past year, PYPL has announced deals with AAPL, V, JPM, M, DFS and WFC, among many others. The partnerships allow PYPL to be used in more ways – such as in Apple’s digital stores – and encourages card issuers and others to promote PYPL to its customers.
  5. One big partnership that has eluded PYPL, however, is AMZN. That could be a problem as AMZN takes larger and larger chunks of online transactions. Longer term, some analysts see AMZN as a potential direct competitor to PYPL if it builds out its Amazon Wallet into a full-fledged payment platform.
  6. PayPal continues to try to make in-roads as a payment option for in-store purchases. Its network of 16 million merchant customers is comprised mostly of smaller vendors, but it has its sights set on attracting big retailers. And it hopes that its One Touch system makes it easier for customers to pay in store.
  7. Blueshift’s April 21, 2016, report said PYPL would continue its growth among users and mercha Merchants were increasingly accepting PYPL because of its brand recognition and the greater likelihood of consumers making a purchase when PYPL is offered as a payment option.

 

Will PYPL Choice help attract and retain consumers? Will it result in more consumers choosing payment options that are less profitable for PYPL? Will the company be able to monetize Venmo? How long will that take? What other growth avenues does PYPL have? Can it increase its share of in-store transactions? How? How big of a threat is AMZN as a direct competitor? 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, Partners, and Industry specialists.

 

Companies: PayPal Holdings Inc. (PYPL), Visa Inc. (V), Mastercard Inc. (MA), Discover Financial Services (DFS), Apple Inc. (AAPL), Samsung Electronics Co. Ltd. (KRX:005930), JPMorgan Chase & Co. (JPM), Citigroup Inc. (C), Wells Fargo & Co. (WFC)

 

Research Begins: August 21, 2017