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PayPal/Square Idea Proposal (PYPL)

PayPal/Square Idea Proposal (PYPL)

Will Square’s Cash App upend PayPal’s grand plans for Venmo?

Report Available: October 9, 2019


Blueshift’s ongoing research found SQ’s peer-to-peer payment service, Cash App, surpassing PYPL’s Venmo in downloads and revenue run rate. The peer-to-peer space is a huge opportunity for both companies, who are trying to monetize their millions of users and billions of dollars that flow across their platforms. The battle is becoming increasingly important as both companies are scuffling, having disappointed investors with their revenue forecasts. SQ and PYPL want users to pay for goods and services with their peer-to-peer account balances, a goal that keeps getting tougher with competition from big banks and AAPL.



  1. SQ’s Cash App appears to be gaining momentum in its battle with PYPL’s Venmo for supremacy in peer-to-peer payments. Cash App had its best month ever for downloads in July, according to one analysis, and has now accumulated nearly 60 million total downloads, surpassing Venmo’s 52.7 million. SQ also seems to be further along in its monetizing efforts: Cash App produced $135 million in net revenue for SQ in Q2, putting it on a $540 million annual run rate. PYPL did not offer an update on Venmo’s revenue contribution in Q2 but had said it was on a $300 million run rate the prior quarter.
  2. Venmo was identified in Blueshift’s Sept. 18 2017, report as PYPL’s most exciting growth opportunity outside of its core ecommerce and payment processing. Venmo’s total payment volume hit $24 billion in Q2, up 70% year-over-year. The company said 15 million users have engaged in a monetizable transaction, with Instant Transfer fees currently delivering the most revenue. The company is ramping up its partnerships as it tries to get more Venmo users to pay retailers out of their Venmo balance. PYPL announced a number of new merchant partners for Venmo in Q2, including Fandango, Stitch Fix and 1-800-Flowers. However, peer-to-peer payments may be even more important to SQ than PYPL, as its Cash App and linked debit card, Cash Card, accounted for 13% of the company’s Q2 revenue, compared to Venmo’s 2% share of PYPL’s total revenue.
  3. Both SQ and PYPL disappointed investors when announcing Q2 results. SQ said revenues were up 44% year-over-year, but the company’s forecast for Q3 revenue fell short of analyst estimates. Likewise, PYPL’s revenue climbed 12% over last year’s Q2, but the company lowered its full-year revenue estimate, citing delays in product integration and currency headwinds.
  4. Even as they do battle with each other, SQ and PYPL hardly have the peer-to-peer payment space to themselves. Use of Zelle, backed by a consortium of major banks such as JPM and WFC, is growing fast as it is built into most banking apps and offers fee-free instant transfer. Zelle processed $44 billion in transactions in Q2, nearly double that of Venmo. Further, all of the major players will have to contend with the new Apple credit card. While the Apple Card is not a direct competitor for peer-to-peer payments, it could hinder efforts by SQ and PYPL to reach their ultimate goal – getting consumers to use their apps to pay for goods and services, both online and in physical stores.
  5. Sources in Blueshift’s Jan. 11 report said Venmo is a valuable asset for PYPL that could pay off within three years, as the service is building a habit among younger consumers in the same way credit cards did with the two previous generations. Turning Venmo profitable will be a slow process, however. Its biggest money-making opportunity also is its trickiest: gaining share in point-of-sale transactions.


Why is Cash App building momentum? Is it sustainable? Does Cash App have a clearer path to profitability than Venmo? Which service can break through with retailers? Will the Apple Card hurt Venmo’s and Cash App’s efforts to gain share in point-of-sale transactions? How will Zelle affect the playing field? To answer these and other questions, Blueshift will gather data and issue a market research report from independent sources in the following areas: Payment technology developers, Retailers, and Industry specialists.  


Companies: PayPal Holdings Inc. (PYPL), Square Inc. (SQ), Apple Inc. (AAPL), JPMorgan Chase & Co. (JPM), Wells Fargo & Co. (WFC)


Research Begins: September 9, 2019



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