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Take It to the Bank: PayPal Continues to Shine (PYPL)

Research Question: 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?


By: Seth Agulnick

Click here to download report (.pdf)


Summary of Findings

  • Momentum for PayPal Holdings Inc. (PYPL) has shown no signs of waning, and the payment platform has several enormous (but challenging) opportunities for further growth.
  • One of the biggest segments in which PayPal is gaining traction is in merchant services and payment processing through its own brand and its Braintree subsidiary, a trend flagged by Blueshift Research in an April 2016 report. Stripe is a formidable competitor with a nearly identical product, but the two together are taking share from traditional processors with old technology, such as First Data Corp. (FDC) and Global Payments Inc. (GPN).
  • Eleven of 15 sources representing retailers, payment technology developers and other industry specialists said consumer use of PayPal is on the rise, buoyed by mobile shopping overall and the ease of selecting PayPal at checkout. One source who operates a domain registration and web hosting service said 90% of his customers choose PayPal over a credit card.
  • Sources see several opportunities for PayPal to increase how frequently its existing customers use its platform. Four said its “choice” program, which enables shoppers to more easily use a credit card than a bank account as the underlying payment, will boost usage. Another pointed to PayPal Credit as a growth driver.
  • Still, PayPal is likely to struggle to become an in-store payment option, according to four sources. 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.
  • Venmo may be PayPal’s most exciting growth opportunity as it already has cleared two big hurdles: getting users to download the app and linking it to a bank account, one source said. Five sources were skeptical, however, that PayPal will be able to monetize Venmo as a method for buying goods and services, especially with competition from Early Warning Services LLC’s Zelle, a similar product backed by a consortium of major banks.
  • None of the major competing platforms likely will hinder PayPal in the near term. Tap-to-pay mobile phone options have some attractive features but rarely are used. Inc.’s (AMZN) Amazon Pay likely will meet resistance from retailers that see the company as competition. Also, Alibaba Group Holding Ltd.’s (BABA) Alipay, a major player in international markets, has not yet gained ground in the United States.

Silo Summaries

1) Industry Specialists

PayPal’s growth should continue unabated. It has a strong presence in all major payment segments and is gaining ground in international markets. One source said merchants that add PayPal as a payment option see conversion rates jump by as much as 8%. PayPal’s “choice” program will spur further use, one source said, while another pointed to PayPal Credit as increasing frequency of use. Also, PayPal’s Braintree division is gaining share from legacy technology providers in payment processing. Sources were mixed on PayPal’s outlook as an in-store payment option. PayPal has several significant challengers outside the United States, but such platforms have not yet become a domestic threat. PayPal will have real trouble turning Venmo into a payment option.

 2) Payment Technology Developers

PayPal should continue its upward trajectory. It has reached a critical mass that forces most retailers to offer it as an option and will continue to benefit from the overall growth in online shopping. PayPal’s “choice” program is a good step toward increasing how frequently customers use the platform. Three sources cited mobile systems like Apple Pay as a big obstacle to PayPal in stores, while two said Amazon Pay is a potential threat in general. One source noted a huge, untapped opportunity for PayPal with bill payments. Venmo could be a huge winner for PayPal, though it will have serious competition from Apple and others.

 3) Retailers

Seven sellers of online goods and services had mostly positive comments about PayPal and its growth outlook. PayPal use has increased for three of the four sources who discussed transaction trends. Usage ranged from as high as 90% of transactions for one source to about 10%. Customers have not been asking for PayPal as an in-store payment option, but a big-box retailer will test it out as a way to lure younger shoppers, one source said. Four sources said they have no plans to look at other payment options such as Apple Pay or Amazon Pay. Two sources have not seen any signs that buyers are interested in paying with Venmo, but one said his company will have to consider it because it targets younger shoppers.



PayPal has surpassed analyst expectations every quarter since being spun off from eBay Inc. (EBAY) in 2015. In the second quarter, revenue 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 users. 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. PayPal will be rolling it out in new territories, including Japan and the United Kingdom, later this year. However, the choice program could encourage users to choose funding methods that are less profitable for PayPal.

PayPal also is trying to monetize Venmo, its peer-to-peer payment system. Venmo processed $8 billion of total platform volume in the second quarter, up 103%. Such transactions currently do not generate any revenue. As a result, PayPal’s “take rate”—the percentage of revenue the company records per transaction—fell again in the quarter. PayPal is working on a system to allow users to pay merchants directly from money stored in their Venmo wallets, transactions from which the company would take a cut.

A key part of PayPal’s recent strategy has been to partner with companies that have long been viewed as competitors. In the past year, PayPal has announced deals with Apple Inc. (AAPL), Visa Inc. (V), JPMorgan Chase & Co. (JPM), Mastercard Inc. (MA), Discover Financial Services (DFS) and Wells Fargo & Co. (WFC), among many others. The partnerships allow PayPal to be used in more ways—such as in Apple’s digital stores—and encourage card issuers to promote its service to their customers. One big partnership that has eluded PayPal, however, is, which could be a problem as Amazon takes larger and larger chunks of online transactions. Longer term, some analysts view Amazon as a potential direct competitor to PayPal if it builds out its Amazon Wallet into a full-fledged payment platform.

PayPal continues to try to make inroads as a payment option for in-store purchases. Its network of 16 million merchant customers is composed mostly of smaller vendors, but it has its sights set on attracting big retailers. It also hopes that its One Touch system makes it easier for customers to pay in store.

Sources for Blueshift Research’s April 21, 2016, report said PayPal would continue its growth among users and merchants. Merchants were increasingly accepting PayPal because of its brand recognition and the greater likelihood of consumers making a purchase when PayPal is offered as a payment option.



Current Research

Blueshift Research assessed whether PayPal could continue its rapid growth. We employed our pattern mining approach to establish four independent silos, comprising 15 primary sources (including two repeat sources) and three secondary sources focused on PayPal’s Venmo. Interviews were conducted Aug. 28 through Sept. 13.

  • Industry specialists (4)
  • Payment technology developers (4)
  • Retailers (7)
  • Secondary sources (3)



Next Steps

Blueshift Research will further explore the upcoming battle between PayPal’s Venmo and Zelle as peer-to-peer transfer apps. We also will take a closer look at the competitive dynamic between PayPal’s Braintree and Stripe. Finally, we will revisit Alipay’s efforts to become a payment option in the United States.




1) Industry Specialists

PayPal’s growth should continue unabated, according to all four sources in this silo. It has a strong presence in all major payment segments and is gaining ground in international markets. One source said merchants that add PayPal as a payment option see conversion rates jump by as much as 8%. PayPal’s “choice” program will spur further use, one source said, while another pointed to PayPal Credit as increasing frequency of use. Also, PayPal’s Braintree division is gaining share from legacy technology providers in payment processing. Sources were mixed on PayPal’s outlook as an in-store payment option. One source said in-store payments will continue to move toward more frictionless options, including hands-free systems. Apple Pay has not made much headway, two sources said, but one expects its speed advantage to increase its popularity. Stripe is similar to Braintree but has some advantages, such as ease of setup, that may force PayPal to lower prices or change its implementation strategy. PayPal also has several significant challengers outside the United States, such as Alipay and Tencent Holdings Ltd.’s (HKG:0700) Tenpay, but such platforms have not yet become a domestic threat. Firms that can offer numerous services, from website building to payment options, eventually could cut into PayPal’s U.S. share, one source said. Meanwhile, two sources said PayPal will have real trouble turning Venmo into a payment option, with one also citing Zelle, a competing product backed by a consortium of major banks. However, a third source noted some interest from Venmo users to have certain retail purchases show up in a social feed for friends to see.


Key Silo Findings

PayPal Engagement

–    4 of 4 said PayPal use remains on an upward track.

o    1 said ease of checkout is helping PayPal grow in Australia, the UK and other countries.

o    1 said PayPal has a strong play for consumer user, online businesses and payment processing.

–    1 said his merchant clients that add PayPal as a payment option see a bump in conversions of as much as 8%.

–    1 said PayPal “choice” will increase use of the platform, while 1 other said products like PayPal Credit have increased frequency of use.

–    1 said PayPal’s Braintree unit for payment processing is gaining a lot of traction among merchants.

–    2 said PayPal can make inroads as a payment option in physical stores, but 1 cited too many obstacles.

–    1 said the trend in payments is toward frictionless and even hands-free systems.


–    2 said mobile phone payment systems such as Apple Pay have more hype than is justified, based on usage trends. 1 other said their popularity will grow because of their speed advantage over other options.

–    2 said Stripe is a formidable competitor to Braintree as it offers more features and simpler implementation with the same fees.

o    1 said PayPal may have to mimic Stripe’s implementation strategy or lower Braintree’s fees to compete.

–    2 said Alipay and Tencent’s WeChat Pay are legitimate competitors to PayPal outside the U.S., while 1 other said even his clients with big operations in Asia do not ask about Alipay.

–    1 said PayPal’s partnerships with credit card networks does not really change the competitive dynamic and may ultimately hurt PayPal by increasing the use of credit cards as the underlying payment on PayPal transactions.

–    1 said firms like Shopify Inc. (TSE:SHOP) offering bundled ecommerce services could take share from PayPal.

–    1 said PayPal does not have the capability to provide the broad integration needed by large merchants.

–    1 said Amazon could be a threat to PayPal, but noted that use of Amazon Pay is miniscule. 1 other suggested retailers would be wary of turning over their payment platform to a competitor like Amazon.


–    2 said Venmo will be hard-pressed to catch on as a consumer-to-merchant payment option.

o    1 said the major banks have their own Venmo-style peer-to-peer payment systems with big advantages.

o    1 said vendor-specific payment apps are more likely to gain traction than Venmo.

–    1 said Venmo could appeal to some younger consumers that want their purchases to show up in a social media feed.

1) Michele Tivey, cofounder/CEO of FinTech Payments Corp. and director of CNP-Solutions

PayPal is well positioned to grow, especially on the consumer side of its business, as the retail industry moves toward frictionless payments. Stripe is a threat on the payments processing side while Amazon Pay is on the consumer side, but neither is likely to dent PayPal’s near-term prospects. Apple Pay, Samsung Electronics Co. Ltd.’s (KRX:005930/005935) Samsung Pay and Alphabet Inc.’s (GOOG/GOOGL) Android Pay have gained minimal traction. PayPal will have a tough time monetizing Venmo as a mobile payments app, partly because of competition from Zelle.

PayPal Engagement

  • “PayPal is going to keep growing. They’ve got a very high market share of … small online businesses because they have relationships with most of the web hosting services and web builders, and their only competition in that space is Stripe right now. PayPal is known. They have a bigger name [than Stripe], and they’re holding onto their customers if not gaining new ones. So that’s the first market that they own.”
  • “The second market that [PayPal] is in, even if they don’t already own it, is the payment processing market. Through the acquisition of Braintree, they’re settling transactions and performing payments processing down. So they’ve got the B2B as well as the SMBs.”
  • “[And thirdly] with the regular old PayPal product, where you’re paying with the wallet, plus Venmo, they’ve got C2B covered and C2C.”
  • “There’s opportunity for growth in all three.”
  • “Rates of adoption [of PayPal on the consumer side] have exponentially increased in the last three to five years certainly but even in the last two years. They are, without a doubt, the largest payment method being used online.”
  • “The methods of payment are changing, and I think PayPal knew that, which is why they moved into the business side [with Braintree] and also why they acquired Venmo.”
  • “Because PayPal is a wallet and makes purchasing through mobile devices easy, I think [PayPal’s growth] will, at the very least, remain steady. But it seems to me it’s poised for growth quite more so than a typical payment method like a Mastercard or a Visa.”
  • “The move right now in payments is toward frictionless payments—making it as easy as possible to pay for something with as little effort as possible; go into the store and tap your phone and you’ve paid for something. Speak to [Amazon’s] Alexa—’Alexa, order me a pizza’—and it’s paid for. In some Starbucks and McDonald’s out in San Francisco, you walk in, you pick up your food, you walk out and it’s paid for. The chip in the phone that you’re carrying spoke to the chip in the register, and you never even reached in your pocket. It’s called hands-free payment.”
  • “I don’t know whether we’ll see [that growth] in the next 12 to 24 months, but I definitely think that’s where you’ll see commerce moving in the next three to five years.”
  • “Because PayPal is … a wallet that stores payment information, and because it’s really a frictionless payment method, that’s why adoption is so high. It makes it easier for people to buy things. The stressor [to growth] on the consumer side is that there’s always more competition in the space. But what PayPal has proven is staying power, because mobile wallets have come and gone by the hundreds in the last three years and nothing has caught on like PayPal.”
  • “PayPal, with memberships with companies like VeriFone [Systems Inc./PAY], which sells the hardware for POS systems, allows customers the choice of paying with PayPal or a credit card at the point of sale. That’s going to expand. That’s happening.”


  • “PayPal pretty much owns the market on the ecommerce piece; there isn’t any other method like it that people use with as much frequency as PayPal. Amazon Payments has tried it, with ‘Shop With Points‘ and one click. Within the Amazon platform, that’s probably the closest competitor to PayPal, but it only works within Amazon.”
  • “Amazon Payments is trying to compete with PayPal so that you could use whatever the store’s payment method on Amazon is to pay off of the platform. But its adoption is miniscule compared to what PayPal has. But that would be the 1 competitor to online purchasing similar to PayPal.”
  • “Stripe [is a competitive threat] on the payments processing side of the equation. There’s a lot of competition in that space. It really depends on what PayPal’s intention is: Do they intend to just continue to operate with Braintree as an acquirer? Or do they intend to expand and compete with WorldPay on a larger stage by offering more services?”
  • “In that payments processing market, there’s very little differentiation; everybody does the same thing. The only thing to differentiate them from one another is their price point and what other services they plug into. The reason that [Vantiv Inc.’s/VNTV acquisition of Worldpay for $13 billion] has transformed [Vantiv] and set them apart is because they can now do everything from customer acquisition to sales management to processing the payments to settling the payment. [Vantiv/Worldpay are] really are the only people in the space that can do that. Braintree only settles the payment.”
  • “Right now when a credit card is processed, each and every one of those actions is done by a separate company most of the time—giving a piece of revenue to every one of those companies. Vantiv has decided to buy one of each of those companies so that it all goes through them.”
  • “If PayPal, now that they are in the merchant processing space, if they’re seeking to expand along the Vantiv model, right now they own an acquirer, so they could possibly seek to position themselves to acquire a CRM, to acquire some kind of data analytics company, some type of customer acquisition company; another processor with more of an international piece … those are the moves they could make to advance, and that would put them in direct competition with Vantiv.”
  • “The conventional wisdom on Apple Pay waxes and wanes. Apple does a good job at promoting it and making it sound as though it has a large adoption and people are loving it. But in reality, the numbers that they’re putting up really only reflect the number of iPhones that are out there. If you look at the payment numbers, it seems as though it’s one of the least used payment methods out there.”
  • “Android Pay and Samsung Pay, again—I think that the NFC method, which is the technology behind tap-to-pay and what Apple, Samsung and Android Pay are all based on … the idea that you will just use your phone to pay … the industry just really expected that to be the be-all and end-all of mobile payments. It hasn’t really caught on.”
  • “The statistics show that mobile payments are only about 5% of payments being made. I’m talking about people who are using the phone as a method to pay. Apple Pay, Android Pay and Samsung Pay really haven’t caught on.”


  • “I don’t think [Venmo] is going to catch on.”
  • “What’s more likely to happen [than Venmo being used for mobile payments] is the idea of the frictionless payment, [like] your Uber app. That’s completely invisible, frictionless payment. You’ve stored your card on that app, and it was charged and authorized the minute you called for the car. And if your card hasn’t cleared, no car is showing up.”
  • “That’s why you’ll see now Kohl’s [Corp./KSS] has its own payment app, and Target [Corp./TGT] has one, and the grocery stores have their own payment app. People seem to be more likely to use in-app payments than they are those other payments. The Uber model is something they’re adopting.”
  • “Venmo is similar to Alipay [in that] Alipay really owns the market on peer-to-peer transfer, and Alibaba did that and has cornered the market on the idea that you can utilize the phone to move money.”
  • “PayPal needed that [peer-to-peer] piece, but it has a huge competitor for Venmo in Zelle, which was just rolled out this year. It’s an incredible piece of technology because it was developed by a consortium of banks, which has never been done before in the history of the payments industry. Banks like Bank of America [Corp./BAC], Capital One [Financial Corp./COF], Wells Fargo—every major bank you can think of—banded together and purchased a company that does what Venmo does and all agreed to use this one thing.”
  • “Instead of there being eight little Venmo competitors, there’s Zelle. Chase customers are using Zelle and Wells Fargo customers are using it, as are [Citigroup Inc.’s/C] Citibank customers. That integration just started this year for that piece of technology.”
  • “It’s being called [things like] ‘Chase Pay.’ The difference is that when the bank puts together their system, it’s monetized. A bank is not going to let you use a peer-to-peer transfer system and not charge you a fee. But it’s already tied to your bank account. You don’t have to put in a credit card, and when a bank tells you to download an app, it feels much more secure. It’s a very clever way to combat Venmo.”
  • “With Venmo, you have to download it, you have to tie it to credit card or a bank account. And PayPal’s not making any more from that.”
  • “If you’re a Bank of America customer, you already have the app on your phone because you want to check your balances, and BofA asks whether you want to transfer money like Venmo, then use our Venmo. It feels so much safer because it’s coming from the bank. And the bank’s getting paid for it because they’re taking fees for you to have the service.”
  • “It’s hard to say [how PayPal will monetize Venmo]. Silicon Valley has never been big on monetizing things. They’re interested in active users, and what made Venmo interesting to PayPal was the number of people using it. They might not monetize it for 10 years, but … they’re building loyalty and a customer base and users.”

2) Jared Drieling, director of business intelligence for The Strawhecker Group, an electronic payments advisory firm

PayPal has too many headwinds to gain traction with in-store payments. Merchant acquiring is a big opportunity where PayPal is already seeing some success with its Braintree subsidiary, though Stripe is a nearly identical product. PayPal’s recent partnerships with the big credit card networks will not do much to change the competitive dynamics and may be a negative in encouraging more use of credit cards as the underlying payment in PayPal transactions. Internationally, PayPal has many formidable competitors, such as Alipay, while it could be threatened in the United States by companies like Shopify that fold payment processing into a larger suite of services for small businesses. Building out Venmo as an in-store payment option will face similar obstacles as other contactless point-of-sale payment systems like Apple Pay, which have made little headway but have some niche uses, such as in public transportation.

PayPal Engagement

  • “This is really their fourth or fifth attempt to get into the physical environment. I think it’s going to be very difficult for them. They did have an acquisition [in 2015] of a technology company called Paydiant, which was really the backbone of some of the mobile wallets. If you think about MCX [Merchant Customer Exchange, a consortium of large retailers], the backbone of that whole system was Paydiant.”
  • “PayPal has some great technology assets that can be leveraged in the physical environment. Paydiant is one of them. I just haven’t seen much movement. I don’t think it’ll be successful this round again.”
  • “Bill Me Later [which is now called] PayPal Credit has increased frequency of use. There are some other products that, if successfully executed, would [get existing customers to use PayPal more often] as well.”
  • “Where I see a lot of traction from PayPal is in their Braintree unit, in the ecommerce merchant acquiring area. Braintree is very similar to Stripe, almost identical. Those two solutions are booming. Braintree is an asset that is probably bringing the most return for PayPal.”
  • “My focus is on merchant acquiring mostly and I can tell you that many of the traditional merchant acquirers—First Data, Global Payments—with that type of legacy technology are very concerned about the likes of Stripe or Braintree.”
  • “They could potentially integrate Braintree with some of those other solutions PayPal has. When you think about all of those other solutions in the new omnichannel world—being able to provide consumers a way to make payments in a seamless fashion, anywhere, anyhow, anytime—they do have the assets. They do have a lot of those ingredients. It’s just a matter of putting those together and executing them.”
  • “PayPal is still growing up after their split from eBay. Since then, they’ve been trying to create their own identity. They’ve got their hands in ecommerce, physical dongles, Venmo, a branded physical card. They’re trying to make a big push into the physical environment.”
  • “Their strategy is kind of unique. Typically, you’ll find a payment provider in the ecosystem focusing on acquiring or analytics or they’re an issuer. PayPal has been all over the place, even with partnerships and acquisitions. That gives me the sense that yes, they’re growing but they’re also trying to create an identity for themselves.”
  • “If you look at the acquiring market, the processing market, the issuing market—the [leaders] are all incumbents with legacy technology that’s been around a long time and they clearly identify themselves as payments players. PayPal is not defining itself as a payments company. They’re defining themselves as a technology company.”


  • “PayPal, with their competition on a variety of different levels, can almost be considered to have a ‘frenemy’ type of relationship. You work with them, but there’s still competition. There’s a lot of that feeling out as well. A great example of that is the recent partnerships with the card networks, Visa and Mastercard.”
  • “When I saw those partnerships, I wondered what PayPal is really getting out of them. What those partnerships allowed for is PayPal, instead of putting in small font that a consumer can use a credit or debit branded card from Visa or Mastercard, now they’ve just made that font a little bigger.”
  • “That’s definitely a negative [for PayPal] when consumers choose [to use a credit card rather than bank account as the underlying payment]. It’s not a great deal for PayPal. I think there will be a shift [to more credit card use], but I don’t know if I’d go so far as to say it will be significant.”
  • “Visa and Mastercard dominate the physical space, while PayPal is the brand in ecommerce. Ecommerce is a much smaller sandbox to play in although it’s growing quickly. PayPal is trying to get into the physical space and have some of that opportunity as well. But Visa and Mastercard haven’t stopped pushing out aggressive products to compete with PayPal, like Visa Checkout and some Mastercard products. Those are in direct competition with PayPal. It’s still very much a competitive environment.”
  • “On an international scale, Alipay and Tencent with their Tenpay, those are almost identical solutions to PayPal. Alipay with Alibaba and PayPal with eBay—very similar types of evolutions. Alipay is very expansive and growing very quickly and is absolutely a concern for PayPal internationally. And I would also include Tencent’s Tenpay product, which is very similar as well.”
  • “If you look at a region like South America, they’ve got an Amazon-type storefront, Mercado Libre [MELI], which also has a PayPal-like tool that is dominating Latin America. PayPal has some tough competition [in international markets].”
  • “When you hear about omnichannel or bundled offerings, that’s where PayPal has a weakness. What a lot of merchants are looking for today is a single provider who can offer the ecommerce payment capabilities and physical store payment capabilities. PayPal doesn’t have the physical. So a lot of these emerging technology players—I would call out Adyen, Shopify—those types of entities that are not only doing the ecommerce processing for you, they are doing it all.”
  • “If you’re an entrepreneur that wants to start an ecommerce website, Shopify will create your website; they’ll take care of your inventory management; and they’ll take care of your payment processing for you. In under 30 minutes, you’ll have a website set up and can process transactions.”
  • “We’ve seen a lot of other players build out those additional capabilities. Even some of the traditional players like First Data and Clover [Network Inc.]. Clover has an online store solution now. There’s an opportunity for PayPal to add some value-added ecommerce capabilities, maybe website development or inventory management or analytics. There’s a play there.”
  • “Square turned around from a dongle solution to a much more comprehensive payment provider. Now they’re offering a physical POS terminal, a smart terminal; they’re also doing ecommerce. They will also build your website. If you’re a small merchant, you may choose to use a different provider [than PayPal] to do all of that for you. PayPal kind of missed that boat.”
  • “When you become a larger business, perhaps with physical locations in multiple geographies, your needs are quite a bit different [from a small online retailer]. When you’re talking about a large merchant, they’re not having Shopify build their website. Most importantly, when it comes to payments, they need a lot of integration that could include a complex loyalty and rewards program. PayPal just doesn’t have that type of capability.”
  • “Some of the larger organizations like First Data and Global Payments can support those merchants. PayPal, to be able to support larger merchants across physical stores and ecommerce, needs to build out additional capabilities. If you’re a large merchant, you might accept PayPal online, but PayPal is definitely not handling all of their channels and having those channels talk to each other and integrating rewards and those types of functions.”


  • “There will be a lot of issues trying to make [Venmo as a payment option] come to reality. They are trying to use Venmo as possibly a way to get in-store. When you think about Venmo, Paydiant and the PayPal brand, that’s a good combination. I think there’s an opportunity there, but I don’t foresee a lot of success with it.”
  • “If you’re going to have a Venmo wallet for paying in a physical environment, PayPal will probably use contactless or QR code, something the Paydiant technology offers. As we’ve all seen, that’s getting very little traction today. Apple Pay, Android Pay, those types of contactless mobile payments at the physical POS, those are struggling as well.”
  • “There are some verticals [where PayPal could have success] if PayPal was a little more surgical in their approach [to in-store payments]. When Apple Pay was developed, they really cast a wide net. They promoted it as a contactless, seamless method that will work across any merchant vertical, but we know now that’s not the case.”
  • “Where we have seen it adopted—vending machines, big metropolitan transit authorities—those are areas where they are seeing a lot of success. A lot of those types of [payment] offerings are becoming more specialized and focused on specific verticals. I think PayPal will try to do that as well. I just think there are too many headwinds on that front for them.”

3) Scott Tivey, founder/CEO of CNP-Solutions and cofounder/CTO of FinTech Payments Corp.

PayPal transactions will continue to grow at healthy rates as a result of the outsized growth in ecommerce overall. PayPal is a necessity for many online merchants. Mobile payment methods—including Apple Pay, Android Pay and Alipay—are not an immediate threat. Stripe, however, is a solid competitor and is gaining ground rapidly in the startup ecommerce space.

PayPal Engagement

  • “From a transaction percentage perspective, PayPal as a payment method is probably up a few percentage points [in the past few years among our merchant customer base]. It’s not up a tremendous amount; it’s not like it’s grown by leaps and bounds, but it has been slowly growing.”
  • “For our clients who went from no PayPal as a payment method, we have seen a 5% to 8% uptick in initial conversions [when adding PayPal as a payment option]. And then on the back end [using PayPal for merchant services], an 8% to 10% overall pay-up rate.”
  • “More of my clients that are starting to use PayPal see the conversion, then what happens is that they start to promote [PayPal]. [They’ll say], ‘Order your Netflix with your PayPal account, and we’ll give you a month free.’”
  • “The fees also come into play. You might get a 1% or 2% conversion [increase], but if PayPal as a payment method is twice as costly, at least initially, then you have to run the numbers. Is it worth the double in fees upfront to convert a couple of percentage points more?”
  • “Or, on the back end, if they are stickier by 4% or 5%, then I’ll gladly pay [PayPal’s fee of]9% plus 30¢ if I can now get an extra 10% or 15% [retention rate] at my $10 per month fee—my revenue. It’s worth an extra 59¢ in fees if I’m making an extra $10 on the back end because my customer stuck around.”
  • “That’s what the merchants are going against. It’s not just ‘Is the PayPal number up or not?’ It’s ‘Is it worth the PayPal offering? Is it worth for me to promote it?’ Because I know I’ll pay a little now to make a lot of revenue on the back end.”
  • “It is mostly worth it for merchants, but everyone is different when price point comes into play. On a $10 per month fixed fee for Netflix, say, that 30¢ fixed fee hurts me a lot more than on a $100 payment. At a $100 price point, 2.9% plus 30¢ all-in cost is $3.20, or 3.2% net effective. On a $10 charge, the 2.9% plus 30¢ winds up being 59¢, or net-net a higher percentage of your revenue.”
  • “Can PayPal make headway? Absolutely. The [payments] industry itself will just continue to grow, only because of ecommerce. Thousands of new websites come up every single day.”
  • “I think [PayPal’s ‘choice’ program will spur more use]. Whenever the processor offers more payments methods, or gives the merchant the opportunity to sell their own products or services in a wider fashion, then the adoption is higher, the throughput is higher, the customer retention is higher. If the merchant gives the consumer more ways to pay for their product or services, then that customer is more likely to stick around. And that’s how PayPal makes their money: doing more transactions.”


  • “Stripe is probably the biggest up-front competitor on the ecommerce side to PayPal or Braintree. They’re the gorilla of ecommerce and startup payments processing. They’re making it easier for merchants to use by offering five lines of code to put on a website, which gets the Stripe shopping cart active on a merchant’s website.”
  • “Where I find it supremely interesting is if you compare PayPal or Braintree pricing against Stripe, they’re exactly the same: 2.9% plus 30¢ for a settled transaction. With volume, merchants will get a better deal, but I think it’s interesting that a company like Stripe would go in with the exact same pricing model that PayPal has been known for, and which really hasn’t changed in years.”
  • “Stripe, at the end of the day, is the same thing as Braintree: a gateway to settle transactions for a merchant. But they’ve made it easier to set up. They rolled out with that service with the exact same pricing model. It’s interesting to me that they were just willing to win on functionality and ease of technology adoption and not try to win on price. They’re doing extremely well. It’s one of the fastest growing payments processing companies in the industry so far.”
  • “Where Stripe is really winning the battle is in the startup ecommerce space, because I can pop five lines of HTML code into my website and not have to worry now about payment processing. That’s not the case with Braintree/PayPal, because with their integration it’s more heavy lifting.”
  • “Stripe is [also] offering a lot of functionality—data analytics, recurring billing logic, alternative payment methods. For that same fee, they’re offering a fully stacked product and functionality offering … and because they win on the technology side of implementation, they don’t have to necessarily drop the price to compete.”
  • “I don’t know the exact numbers of how much Stripe is winning over PayPal or Braintree, but it would not shock me that either Braintree changes its implementation strategy to be more like Stripe, with five or six lines of code, or PayPal starts to drop its price.”
  • “With Android Pay and Samsung Pay and Apple Pay, you’ll [hear] everywhere that it’s the greatest thing, but when you go to the merchants themselves, not so many of them offer Apple Pay—because to them, it’s either too expensive or not enough of their customers have really asked to pay with Apple Pay.”
  • “[Apple Pay and other mobile payment platforms] are growing, for sure. But I can tell you—at least from my clients—none of them have really screamed for a processor that accepts an Apple Pay or an Android Pay or a Samsung Pay, because the customers are not asking for it.”
  • “I don’t see Alipay as a threat. It is huge from a global perspective. But my clients—even though they have international footprints in China and the APAC part of the world—have not really asked for it.”
  • “Our clients are 90% U.S. domestic headquartered. But of the clients we have, probably 75% or 80% of them are doing business outside of the U.S. Of that 75% or 80%, one or two of them offered Alipay, and they offered it before we engaged with them.”


  • N/A

4) Managing director of a retail consulting firm

PayPal use is increasing, especially in such countries as Australia and the United Kingdom. Ease of checkout is attracting consumers. To increase frequency of use, PayPal must educate consumers and make fees transparent for merchants. PayPal can grow in brick-and-mortar stores, but it may need a generous rewards program. Apple Pay and Android have a speed advantage.

PayPal Engagement

  • “My global experience is that use of PayPal is increasing, especially in places like Australia and the UK. The reason for that is ease of checkout. Shoppers don’t want to pull their credit card out, especially if they are at work.”
  • “To increase usage [further], PayPal can educate consumers about the checkout environment, that it can be an easier experience. On the merchant side, overseas, PayPal must make sure pricing is in the local currency and deal with fees in a transparent way. There should be no hidden fees. They would get increased use if they were a trusted payment method.”
  • “PayPal can make inroads in stores as long as it is easy to use and offers incentives to consumers. If consumers get rewards back, that would help. A lot of consumers in the U.S. are driven by rewards.”
  • “They already are making strong inroads with larger merchants.”


  • “I have people telling me they’re seeing Alipay and WeChat Pay showing up more.”
  • “A digital currency could ultimately be a threat.”
  • “Amazon [Pay] probably wouldn’t float too well. As soon as a retailer gets its own store separate from Amazon’s ecosystem, I don’t know if they would trust or want Amazon. What are the benefits beyond making the payment a little easier? I can’t see that as an incentive for merchants, unless Amazon is pushing consumers to your site.”
  • “Apple Pay and Android do have an advantage. I prefer to use Apple Pay on my phone. I started using it at Trader Joe’s because their chip reader took forever. Apple Pay takes two seconds. There’s no way I’d try PayPal [in-store] unless they had great rewards. I’m already getting rewards on Apple Pay. I have my credit cards attached to it.”


  • “[Venmo] might be something millennials use [to pay for goods and services]. It can socialize the payment experience, like ‘Look, I bought this blouse.’ It depends on what people want to share.”



2) Payment Technology Developers

All four sources in this silo expect PayPal use to continue its upward trajectory. It has reached a critical mass that forces most retailers to offer it as an option, one source said, and will continue to benefit from the overall growth in online shopping, according to another. PayPal’s “choice” program is a good step toward increasing how frequently customers use the platform, three sources said. Two sources were split on whether PayPal’s rewards Mastercard will have much effect. PayPal is not likely to get anywhere as an in-store payment option, according to two sources, though two others were slightly more optimistic. Three sources cited mobile systems like Apple Pay as a big obstacle to PayPal in stores, while two said Amazon Pay is a potential threat in general. One source noted a huge, untapped opportunity for PayPal with bill payments. Venmo could be a huge winner for PayPal, according to one source, because it is already well distributed and linked to bank accounts. Still, Venmo will have serious competition from Apple and others.


Key Silo Findings

PayPal Engagement

–    4 of 4 said use of PayPal for ecommerce transactions will continue to grow.

o    1 said PayPal has reached a tipping point at which online retailers almost have to offer it.

o    1 said PayPal will benefit from the continued overall growth of digital payments and mobile commerce.

–    3 expect PayPal’s “choice” program to increase how frequently consumers use PayPal.

–    1 said PayPal offering a 2% cash-back credit card also will spur more use of the platform, though 1 other disagreed since so many credit cards offer similar rewards.

–    2 do not have much optimism for PayPal gaining traction with in-store payments, though 2 others think it is possible.

–    1 said a huge opportunity for PayPal is with bill payments.

–    1 said consumers should be concerned about PayPal’s security.

–    1 said merchants and technology developers are frustrated by PayPal’s lack of support and that competitors like Stripe have much better APIs.


–    3 said mobile phone payment systems like Apple Pay and Android represent a significant roadblock for PayPal with point-of-sale transactions.

–    2 said Amazon Pay is a potential threat.

–    1 said Stripe is a key competitor, though PayPal offers lower fees than Stripe for purchases under $5.


–    1 said Venmo is PayPal’s most exciting growth opportunity because of its distribution and engagement.

–    1 said Venmo will have to fight off competition from Apple and others.

1) Senior engineer at a software development firm

PayPal’s new 2% cash-back credit card is a sign that it is trying to play catch-up with its competitors, while its Micropayments has a fee advantage. The “choice” program is good but overdue. PayPal’s 20-character password maximum is a problem. The company may make inroads with in-store payments, as its fees are slightly lower than Square’s. In terms of mobile payments, PayPal is at a disadvantage to Apple Pay and Android Pay.

PayPal Engagement

  • “PayPal is playing catch-up, as evidenced by the fact they now offer a 2% cash-back card.”
  • “PayPal Micropayments offers better fees than Stripe for purchases under $5.”
  • “PayPal choice is adding user experience that should have been implemented at the start.”
  • “PayPal, along with other payment vendors, will see continued growth as a result of the digitization of payments and mobile commerce. Mobile commerce will benefit from smarter chatbots and mobile messengers that will enhance real-time, personalized shopping experiences.”
  • “PayPal’s 2% cash-back card, and the fact that PayPal choice lets customers select which credit card or bank account to draw from, represents a start for PayPal to increase customer usage.”
  • “However, the 20-character password maximum is why I deleted my PayPal account and should be a concern for anyone when considering a ‘secure’ application, especially a payment platform.”
  • “As for PayPal choice, not having it was one of the reasons why I terminated my account. My charges through PayPal were hitting my bank account and not my rewards credit card. At the time, there wasn’t a way to change that, which cost me rewards points.”
  • “When it comes to [processing] physical credit cards, Square is very dominant, and retail is slow to change. But PayPal’s fees are slightly lower than Square’s, which may be enough of an incentive for some.”


  • “When it comes to mobile, PayPal is going to have a tough time becoming the default payment method. Users will probably just stick to Apple Pay or Android Pay for their device.”
  • “The biggest competitive threats to PayPal are Apple Pay and Amazon Pay, Stripe, too, constitutes a threat, though PayPal Micropayments may be enough of an incentive for businesses selling items under $5.”
  • “The stores I frequent do not currently accept Apple Pay. I’d rather not have my credit cards accessible through my phone or watch via NFC as there isn’t much security, but I can’t speak for others on that.”
  • “Views toward Amazon Pay depend on the retailer and its target market. Some retailers are closing brick-and-mortar and switching to sell on Amazon, such as Nike.”


  • “Apple’s iMessage is moving into Venmo’s territory, and we will likely see more competitors.”

2) CEO of a mobile bill payments company

Venmo has become dominant in mobile payments and may be PayPal’s best opportunity to improve its growth rate. Venmo is far more promising than PayPal’s POS partnerships and other ecommerce initiatives. It has already crossed one of the biggest barriers to mobile payments: getting people to download and use an app that is connected to a bank account. Mobile bill payments are a massive opportunity that PayPal has targeted with its recent acquisition of TIO Networks. Less than 2% of bill payments in North America are done through mobile devices, compared with 30% to 40% of other types of ecommerce.

PayPal Engagement

  • “In payments, the No. 1 category is POS. People are paying with Visa [and credit cards] in general. I don’t see PayPal’s activity that strong there yet. In brick-and-mortar, I don’t know what they’ve been doing to grow this.”
  • “In ecommerce, they definitely do very well.”
  • “On P2P [peer-to-peer], they’re definitely tackling this with Venmo.”
  • “Then there’s bill payments, and [PayPal] just acquired TIO. They definitely want to go into that direction, which makes sense.”


  • “POS is such a competitive space, and regardless of Apple Pay and others, there are thousands of payment companies offering services that are a relative commodity for merchants. In the POS vertical, I don’t see any indication Apple Pay [poses an immediate threat].”
  • “We are focused on mobile. Getting mobile distribution is very hard; it’s the hardest part. My guess is that PayPal faces the same issues [as any mobile company]. They are definitely not frictionless. It’s not universal. You cannot use it for everything; you can’t pay a bill, for instance.”
  • “[The PayPal] experience is merchant-centric, not user-centric. If you’re looking into mobile, you need to be user-centric.”
  • “If they want to compete on the mobile POS payments, they have to compete with credit cards, which in the U.S. is very hard to shift. Second to that is Samsung Pay and Google Pay and Apple Pay, because they are already inbuilt into the cell phone, so everyone who has an iPhone has Apple Pay.”
  • “PayPal has the extra burden of getting people to download their app, and getting distribution is very, very hard.”
  • “The regulatory framework for bill payment is very high. To become a bill pay company, you need one license per state in the U.S., and this costs $3 million to $5 million, and about three to five years of waiting. This is a big hurdle for any startup or organization to compete. In this way, PayPal is in a relatively comfortable position [in the bill pay space].”


  • “What Venmo has that is amazing is mobile distribution and mobile engagement. Nothing [else] in the PayPal network has this. This is so hard to get not only in payments but in everything. Having an app that people download is already a big challenge. And download plus attach your financial account—that’s a huge burden.”
  • “Once PayPal has that, there are so many things they can go into. PayPal could use Venmo to pay bills and monetize Venmo that way. They can go into loans; they can go into POS using Venmo; to investments.”
  • “It’s not hard to believe that Venmo could be bigger than any of the other PayPal activities.”
  • “Venmo almost singlehandedly has cracked the mobile vertical. And while they are focusing on P2P payments, the level of engagement they have, they could go anywhere they want.”
  • “In the U.S. and in the world, if you look into ecommerce, about 30% to 40% is done on the phone. Gaming is more than 50%. When it comes to bill payment, it’s less than 2%; it’s about 1.4%.”
  • “So there is a huge, huge anomaly on this vertical. If you have a parking ticket, for example, I bet you’ve never paid from your phone. I was giving a speech in the Silicon Valley recently, and out of 200 people, only one had paid a parking ticket from the phone. It’s the same with medical and other bills.”

3) Engineering manager at an information technology consulting firm

PayPal usage has grown slightly, thanks to its convenience. Also, PayPal’s partnerships with banks and credit card networks help create consumer trust. Still, the company needs a new value proposition to boost usage. It can infiltrate in-store payments as the company already has online relationships with potential in-store customers. Apple Pay and Android Pay are PayPal’s most immediate threats because of their exposure advantage.

PayPal Engagement

  • “Usage of PayPal seems to be increasing slightly. That’s because of its convenience. If I don’t find my credit card and my wallet is far away, then I use PayPal.”
  • “The partnerships with banks and credit cards will probably increase usage because those partnerships establish trust for consumers.”
  • “To increase use, PayPal needs to bring up a new value proposition. People mainly use it for convenience, for micropayments and easy transfer of money. I’m not sure what the new value proposition would be. That’s up to PayPal.”
  • “I doubt the solution is a credit card with 2% cash back. That’s like a mosquito bite. It’s just another among many credit card offers that consumers receive. Maybe it would work for people who already have at least one card and want another.”
  • “The choice program probably will bring increased usage. People aren’t super eager to link to their bank accounts. It’s easier to link their credit cards, and they get rewards that way.”
  • “PayPal can make inroads in-store. They already have exposure to potential customers online. Now it’s mostly young people using PayPal. Perhaps they can attract older people who aren’t using it already to use it in stores. People would use it for its simplicity.”


  • “The whole banking industry will likely become a competitor. Sooner or later, every banking institution will realize it can do pretty much what PayPal is doing. If they see someone else doing well, they want a piece of the pie, like Uber and Lyft.”
  • “The most immediate competitors are Apple Pay and Android Pay. They have the benefit of more exposure. Those two will continue to grow, and plenty of other companies will join in.”
  • “[Retailers] would definitely offer a payment platform from Amazon. Amazon has proven to have good solutions. People trust it.”


  • N/A

4) Chief developer for a payment consulting firm

PayPal is so universal that retailers have to use it, but many would leave for a better alternative. PayPal provides no support to retailers or technology developers. Retailers would be a lot more enthusiastic if they could accept credit cards through PayPal without a fee. Stripe and Visa’s have better APIs. Any company that makes the payment process easier could threaten PayPal.

PayPal Engagement

  • “[PayPal] cut their list of developers, so now thousands of companies have no way to find developers to help with the PayPal platform. There’s universal frustration because of bad support. There’s no support for companies or developers.”
  • “[PayPal] is so ubiquitous that retailers have to use it. If there was a good alternative, people would abandon them quickly. From an end user’s standpoint, it’s fine. Consumers like it. But on the business side, if you have to use it, they’re really a pain.”
  • “I don’t see why consumers would care about [PayPal’s] partnerships with banks and credit card companies. It’s opaque to consumers what’s being used at the back end.”
  • “The issues for PayPal are at the retailers’ end. Sometimes you have to drive usage from the back office forward. If they could take better care of businesses and developers by providing better support, that would be big.”
  • “They should scrap their APIs and make them better. Stripe and are much better on that score. If PayPal really wants to move forward, it needs to have businesses and developers on its side, and right now it doesn’t have that.”
  • “One thing that would be huge is if PayPal had a way to accept credit cards without a fee and without the PayPal logo appearing. They would win back a lot of business from other payment options. A lot of companies shy away from PayPal because not every consumer has a PayPal account. If PayPal offered just a credit card option without its logo, that would really help.”
  • “Choice could spark more use of PayPal. More choice for consumers is a good thing. It’s one other option. Some consumers may not want to link to their bank account.”
  • “As for in-store use, who the heck remembers their PayPal password? They may have to make it go through your phone. I would have used it at times, including at Home Depot recently, but I couldn’t remember my password. Also, it’s a pain in the neck trying to touch the keys with a stylus. Some of those machines aren’t very good or sensitive.”


  • “Anyone that makes it easier to enter your credit card information without getting in your face can challenge PayPal. It is so aggressive.”
  • “Apple Pay and Android could represent a threat at point of sale. If it’s simpler to use than PayPal and doesn’t require remembering a password, that could work. I think retailers would consider Amazon for simplicity and convenience.”


  • “As it’s already peer to peer, if it’s simple, [Venmo] probably would attract users [as a payment option].”



3) Retailers

These seven sellers of online goods and services had mostly positive comments about PayPal and its growth outlook. PayPal use has increased for three of the four sources who discussed transaction trends. Usage ranged from as high as 90% of transactions for one source to about 10%. The convenience of PayPal makes it easier for consumers to pull the trigger on a purchase, one source said, while another said many consumers swear by the platform. Customers have not been asking for PayPal as an in-store payment option, but a big-box retailer will test it out as a way to lure younger shoppers, one source said. Another said her store chose a credit card processor over PayPal for in-store payments because it was cheaper. Four sources said they have no plans to look at other payment options such as Apple Pay or Amazon Pay, though two others said mobile payment platforms like Apple Pay are gaining interest from sellers. Two sources have not seen any signs that buyers are interested in paying with Venmo, but one said his company will have to consider it because it targets younger shoppers.


Key Silo Findings

PayPal Engagement

–    3 of 7 sources said PayPal use is increasing on their websites, while 1 reported no change over the last 6 months. 1 is just adding PayPal to his site, 1 said it is not used very often and 1 did not offer a comparison.

–    1 said 90% of customers pay with PayPal, while 1 pegged the figure at 25% to 30% and 1 said PayPal is used about 10% of the time.

–    1 said PayPal removes a barrier for people to make a purchase, and 1 other said it is a strong brand with a loyal following.

–    1 said a big-box retailer is adding PayPal as an in-store option to try to lure younger shoppers, though customers have not specifically requested PayPal for in-store purchases.

–    1 said her store chose a credit card processor over PayPal for in-person payments because it was less expensive.

–    1 said PayPal sometimes pays online retailers to get more prominent placement of its button as well as advertisements throughout a site.

–    1 dislikes PayPal because its fees are too high for small-dollar purchases.

–    1 is likely to look for an alternative to PayPal for paying out commissions because of high fees and the inability to make payments in real time.


–    4 are not considering adding any other payment options, such as Apple Pay or Amazon Pay. 1 would consider Amazon Pay.

–    1 said mobile payment systems like Apple Pay and Android Pay are trending up, while 1 other said such mobile options are top of mind for many retailers.

–    1 reported little much difference between PayPal and the major credit cards in terms of fees or customer service.

–    1 uses Stripe to accept and process payments because it had better integration and easier setup.


–    1 said his fashion retail operation will have to consider Venmo as a payment option because it targets younger shoppers.

o    Many younger buyers do not carry cash and would be interest in paying with Venmo.

–    2 said Venmo is not under consideration because customers have not voiced an interest in using it.

1) Vice president of ecommerce for a women’s fashion retailer

PayPal accounts for less than 10% of online sales, used mostly by younger shoppers. At this executive’s former employer, a big-box retailer, PayPal was used slightly more often, mostly by people checking out as guests as opposed to customers with accounts. Use of PayPal is increasing at both retailers but very slowly, with growth coming from new users rather than people migrating from credit cards. The big-box retailer plans to use PayPal in-store. Younger customers would be interested in using Venmo.

PayPal Engagement

  • “At [my former employer], the big-box retailer, PayPal use was close to 10% among online customers. We found that most PayPal users were guests as opposed to people who had accounts. We had a very loyal customer base who had enough trust to save their credit card information in their accounts. For guests, it’s easier to just hit the PayPal button.”
  • “At [my current employer], the women’s fashion retailer, the [PayPal use] percentage is in single digits overall. It’s slightly higher for the more discount brands. The brands with older demographics have fewer PayPal users. The ones with younger demographics, particularly early teens to 20s, have higher usage.”
  • “The usage of PayPal is increasing at both retailers but at a very low rate. At the big-box retailer, we didn’t see customers migrating from credit cards to PayPal. It was new customers using PayPal. The retailer was actively pursuing a marketing campaign with PayPal to get their customers to shop there.”
  • “The big-box retailer does sometimes place one payment option more prominently than others. It was able to command payment for that privilege. PayPal’s payment enabled it to choose whether it was on the left or right side of the screen, and there were times the button was bigger and more prominent. Sometimes it is advertised throughout the site.”
  • “The big-box retailer plans to accept PayPal in-store. PayPal is funding the rollout and then some. The retailer hoped to bring in PayPal customers, and younger customers is what PayPal advertised.”
  • “Customers have never requested PayPal as an in-store option.”


  • “Both retailers take credit cards, cash and checks. At the big-box retailer, you can place an order in-store through their ecommerce site and use PayPal for payment. [That’s done] via an associate device in-store: iPad, iPhone and web-enabled POS [point-of-sale] that access an application that is basically the website with additional functionality specific to store associates.”
  • “One of the enticements of PayPal is that the [fees] are lower than for credit cards.”
  • “We keep a close eye on Apple and Android too. Mobile is top of mind for everyone. For in-store, that’s what retailers are looking for—to take both. That could hurt PayPal.”
  • “I’m definitely not hearing of people using Alipay, though companies are aware of it.”
  • “The big-box retailer definitely wouldn’t use [Amazon Pay] because it sees Amazon as the enemy. The women’s fashion retailer might consider it because they do some selling on Amazon’s marketplace.”


  • “A lot of people at the fashion retailer don’t even know what Venmo is. But they target younger people, so they will definitely have to consider it. The big-box retailer has a much older demographic, so I’m not sure they would be interested.”
  • “Younger consumers are interested [in Venmo]. Younger folks I know don’t even carry cash, so if they’re shopping in-store, I think they would be interested. A lot of kids like to buck the establishment, and they already view PayPal as part of the establishment.”

2) Ecommerce adviser to an online fashion marketplace that sells goods from other retailers

Customers do not use PayPal often. More are choosing to use Apple Wallet or credit cards affiliated with specific retailers. The company just wants to make payment easy and give customers the methods they prefer. Apple Pay and Android Pay are rising in importance as they make mobile shopping easier. Customers are not showing an interest in Venmo.

PayPal Engagement

  • “The PayPal option isn’t chosen very often by our customers who use mobile checkout. We’ve never done tests as to why. But in the end, they’re shopping through the retailer of the item that appears on our site, and many people have rewards through those retailers’ cards. In addition, Apple Wallet is just as easy.”
  • “We don’t try to emphasize one payment option over another. Our goal is to make shopping as frictionless as possible. We want to give users the easiest path for payment methods they prefer.”
  • “The goal for us is conversion of intent to sales. We get a percentage of the checkout price. So our incentive is just to give customers what they want for checkout.”


  • “In addition to PayPal, we offer American Express [Co./AXP], Visa, Mastercard, and we’re working on Apple Pay. PayPal’s transaction fee is lower than Amex and about the same as Visa and Mastercard—2.9% plus a flat rate per transaction.”
  • “We think Apple Pay and Android Pay are on an upward trend. They make it easier to shop on mobile. There’s limited real estate on a screen, and no one wants to spend time typing credit card information. They allow quicker transactions. Other methods leave items in the cart longer. We want just-in-time purchases and not just purchasing intent.”
  • “PayPal is good if people are buying from a specific retailer, but that’s not the case in our business. Our industry isn’t associated with PayPal, more so with loyalty cards. Most of our customers are women aged 18 to 34. PayPal is more common for peer-to-peer transactions, such as Etsy [Inc./ETSY] and eBay.”
  • “We’d absolutely consider Amazon [Pay]. They already have the Amazon Dash Button for some shopping. It’s really down to one click. That’s pushing PayPal.”


  • “Venmo is more of a peer-to-peer platform: if you owe a friend money for something or are splitting a bill. That’s not to say we wouldn’t consider using it [as a checkout option]. But we don’t have it on our radar. There’s no signal of interest from young people. It’s never mentioned in any of our customer surveys.”

3) Engineering and product management executive at a fast-growing global ecommerce site

This online seller of licensed creative content uses PayPal’s Mass Payments to distribute thousands of mostly small commissions a month, with the volume of those payments growing by 10% to 25% each month. However, the company is exploring alternatives to Mass Payments to try to lower transaction fees, a switch that could happen within a year. The business accepts and processes payments from customers through Stripe. Stripe and PayPal’s Braintree are very close in functionality, but Stripe offered better integration, easier setup and lower fees than Braintree at the time they chose it.

PayPal Engagement

  • “We’re basically a two-sided marketplace. We sell [creative content] and then pay out a commission to [providers of that content].”
  • “We do about $300,000 in transactions a month [from paying customers]. The smallest transaction would be around $50, the largest around $25,000. We use Stripe for that.”
  • “On the [compensation side] we use PayPal’s Mass Payments feature set to pay all our providers their commissions every month. We pay [the providers] 20% commission [on each unit sold to a buyer], and that’s roughly $60,000 a month that we’re paying out to 7,000 to 10,000 different [providers].”
  • “We have at various times looked for other options. But once you get started [as a business], the cost of switching to another provider is such a big chunk of work for us to do, and usually that means doing it from scratch and taking a working financial system and introducing new risk to carry over to a new one. This is basically what prevents us from switching.”
  • “Depending on the time of the year, we’re growing [the volume of PayPal transactions] 10% to 25% month over So that’s the type of growth we [continue to] expect.”
  • “I don’t see our volume [of these transactions slowing] any time soon. [However,] at some point we’re going to look at a line item on our financials one month, and our fees with PayPal are going to hit a threshold. At that point it will be worth it for us to go bring that down, and that’s when we’ll look in earnest for a replacement. My guess is probably within a year.”
  • “It’s because we’re growing so fast, and we’re going to hit a point soon where that’s the largest expense that we can actively bring down, instead of an operating cost that’s growing and we actually need it to grow.”
  • “PayPal charges us one fee to initiate the Mass Payment transfer, and then I believe there’s a flat fee per individual transfer transaction, when somebody claims their funds. And if somebody does not claim their funds it gets returned to us, and then there’s no individual percentage taken out of that.”
  • “Most people [we pay via PayPal] are either already familiar with it or they become familiar with it. So we do have a growing number of [content providers] using PayPal for a variety of reasons, and then we also have some that can’t—either because they live in a country that PayPal doesn’t support or they’re under 18, for example.”
  • “One thing that [PayPal] could deal with better is some form of identity verification, so that we can make sure that we’re paying the right person, instead of just an email address.”
  • “The other thing they could do is make it cheaper to provide payments to people in real time. [With Mass Payments] we get to initiate a payment one month, give people 30 days to claim it, and then while they’re claiming that we can’t really issue another one until the previous one is finished processing. That just causes operational delays. Something that could let us pay people out in real time rather than on these delays [would be ideal].”
  • “As far as handling disputes, PayPal does a better job on the fraud side. Stripe—either through themselves or through the partners that they bring on board—is getting pretty competitive there.”


  • “There are some competitors we’ve looked at [to Mass Payments]. There’s not a whole lot that are a whole lot less expensive. There are some interesting new ones coming on the scene, especially as this type of [two-sided marketplace business, like Etsy and Uber] becomes more common, where these microtransactions happen from business to customer.”
  • “I have a bunch [of competitors to Mass Payments] bookmarked to take a look at, but none of them stand out as viable alternatives yet. There are some that look promising, but they’ll only pay out in the U.S., so to switch over to something like that we’d have to be removing payment options for a large portion of our people. It’s hard for us to go backwards without something that already meets at least some of those minimum requirements for paying [commissions] out.”
  • “[Switching to a PayPal alternative] hasn’t yet hit a critical point for us, and we need to do a little more research into all the other things that come into it. So if we start paying more and more [providers] lots of money, you have legal and tax implications as well, which a lot of [PayPal competitors] don’t take care of well yet.”
  • “To accept money from our customers, we use Stripe, and we use them internationally. We basically just turn on any form of payment that Stripe accepts. When Stripe accepts Apple Pay, we turn on Apple Pay; when Stripe accepts credit cards and international credit cards, we turn those on.”
  • “We turned [the Apple Pay] function on with one click [as soon as Stripe made it available]. What we’ve seen there in terms of why people weren’t using it, they say it’s because their personal [bank] account is tied to Apple Pay, but they’re paying with their corporate card. So for businesses like us, [Apple Pay and similar platforms] are a nonstarter.”
  • “I know PayPal owns Braintree, which we’ve also looked at, and functions in a very similar way to Stripe. The two are very close. We chose Stripe because they have a better integration and easier setup for payment than Braintree did at the time [over four years ago]. Basically, those guys are neck and neck on the number of different types of payments that they accept.”
  • “The other thing that’s important to us is the ability to accept bank transfers, wire transfers, and more enterprise-type payment, non-credit card payments—invoicing and letting people pay from their banks. It’s where both [PayPal/Braintree and Stripe] fall short a bit. But that’s how we look at the competitive landscape between choosing a processor for back-end transactions, for money coming in.”
  • “[Transaction fees] are very comparable [between Stripe and PayPal]. At the time that we made the decision, it was slightly favorable for Stripe. I think both of them had one rate, 2.9% per transaction up to $1 million, and then 2.4% when you cross that $1 million. And I think Stripe was slightly more favorable at that time. To be honest, I haven’t looked [whether those rates have changed].”


  • “We’re never going to introduce a risk, or any more choice in how people can pay, unless they ask for it. So unless [PayPal] figures out a way to make Venmo an option—like Amazon Pay or Apple Pay—that’s just so ubiquitous that people use it, I would not actually choose it. There’s really no reason for us to adopt it.”

4) CEO of a large exercise equipment retailer; repeat source

PayPal is a must-have for this equipment retailer and manufacturer, which was an early entrant into ecommerce, though most sales are now through retailers like Costco and Amazon. For online buyers, the PayPal option functions just like another major credit card—but one that younger customers are more comfortable with. The company also uses PayPal as the engine for its back-end credit card processing.

PayPal Engagement

  • “We’re incorporating PayPal [as a payment option for consumers] into our new website. We don’t currently have it [visible on our website], but we’ve been using PayPal to process our credit card payments [on the back end].”
  • “We [historically] had PayPal on the actual website, and I’m not sure why it’s not functioning right now. But we are getting it back up with the new website.”
  • “We were one of the first companies to get involved with selling online, after [many years of] doing business with the traditional brick-and-mortar type stores. When the internet came around, we got into [ecommerce] well before the Amazons of the world really grew up.”
  • “The way we developed our website [from the start] didn’t match up with PayPal’s system, and we were almost manually inputting information. We’ve been trying to change the website and get it up to speed. We’re in that process now, and we’ll have our new website [this month].”
  • “We just see [PayPal] as another option. We don’t do enough business on our current website to get a really good read [on how or why customers prefer one payment option over another]. It’s hard for us to tell exactly what the barriers are to people [buying from our site].”
  • “PayPal just seems like it removes one more barrier to people pulling the trigger on purchasing a product.”
  • “It’s almost just like another credit card. The conversations we’ve had with customers and just generally, most of the people using mobile devices are real comfortable with PayPal. Older people prefer their credit card.”
  • “Some of our retailers are companies like Walmart, Amazon and Kohl’s. We realize that they’re always going to have more retail power and reach than we do, and we’re suppliers to them, so we try to keep that relationship really strong by not undercutting them in price [on our website] and going up against them on Google Ads and things like that. So we just selectively pick products—whether it’s new or maybe some refurbished pieces—for most of our direct consumer sales.”
  • “For [our new website, getting PayPal up and running on the front end] has been pretty straightforward.”


  • “We’re not looking at any competing payment options currently.”
  • “For younger people, [PayPal] is so easy. They set up their PayPal account, and it’s basically a one-click operation. We looked at PayPal vs. some of the other options out there. We’ll obviously take a Mastercard, Visa and any of the major credit cards, but they’re the only ones we’re looking at.”
  • “We haven’t talked about Apple Pay yet, or any of those. You’ll have the option to check out through your PayPal account, but [PayPal is] also our general payment processor. So you don’t necessarily have to have a PayPal account to check out; you can still use your credit card but with PayPal as the [processing] engine.”


  • N/A

5) Owner of an online retailer specializing in women’s clothing; repeat source

Most buyers choose to pay with a credit card even though this retailer’s online checkout page defaults to PayPal. The mix between credit card use and PayPal has not changed much this year. From a merchant’s perspective, PayPal and the major credit card companies differ very little in terms of fees or dispute resolution, though PayPal does transfer payments a few days faster. This retailer has no plans to look at other payment options.

PayPal Engagement

  • “PayPal vs. credit card use seems to go in spurts. Some people tell me they use PayPal because they feel it is more confidential than a credit card. I get about 75% using credit card and 25% Pay Pal, or 70/30.”
  • “I have not noticed any shift in PayPal use in the last six months.”
  • “I started using PayPal around 2006 or ”


  • “Fees are about the same [between PayPal and credit cards]. I don’t look too closely at fees because it is just the cost of doing business on the internet and I have accepted it.”
  • “PayPal is two to three days quicker to put the money in my account than the credit cards.”
  • “I have no problems with credit cards or PayPal, knocking on wood, with customer service or disputes.”
  • “The [checkout page] defaults to PayPal because I was getting a lot of questions if I accepted PayPal when it was not in the default. I have no other reason why.”
  • “I do ship to Canada so those Canadian customers see PayPal and they are happy.”
  • “I have not considered other payment options like Amazon Pay or Apple Pay.”


  • N/A

6) Administrative assistant for an educational nonprofit with both online and POS transactions

PayPal is being used more by customers of this nonprofit, which mainly sells educational programs. Customers can pay directly online for programs with PayPal, but more often receive a PayPal invoice via email once a program booking is made. The organization does not use PayPal for in-person payments, however, having opted to purchase a Chase terminal instead.

PayPal Engagement

  • “We just started to use PayPal a lot more here. We used to use [GorCorp Inc.’s] USAePay and [TSYS Inc.’s/TSS] ProPay. USA was what our website was linked to, and ProPay is something I used to use to process credit cards. We also used to have Square [Inc./SQ], but nobody’s used that since I’ve been here in the past year.”
  • “We are using [PayPal] more here, especially since having some problems with [other payment options from] our website. And it’s very seamless. The [main] we way we use it is to send invoices. You can [also] go on our website and pay for a program through PayPal.”
  • “Sending invoices via email is so much easier than a credit card for what we do, because I can do it all via email and I never have to call the person.”
  • “The only wonky part is if somebody doesn’t have a PayPal account, they think they have to have a PayPal account to pay an invoice we send through PayPal. They don’t. Even if you don’t have a PayPal account, you can pay the PayPal invoice with a credit card. It’s easy.”
  • “People used to be put off by PayPal invoices if they didn’t have a PayPal account. But then I realized they could just put a regular credit card in. I’ve only asked one person to do that since then, but I feel confident [that there’ll be less confusion] now that I know I can send people a PayPal invoice and they can use a credit card just like any other payment.”
  • “What we use PayPal for mostly here is to send an invoice to someone for them to pay for [a workshop or program]. But we don’t use PayPal for inputting credit cards.”
  • “The service we have now is just the ability to go back and forth with money. We can’t charge a card.”
  • “What you can’t do is walk in here and pay using PayPal. I think [PayPal] wanted like $30 a month [for the credit card processing], and then they charged a percentage fee. So instead we went with Chase bank and bought a terminal for $200, and now that’s ours to keep, no matter what credit card we use. Now I can either swipe somebody’s card if I have it, or input the numbers if it’s over the phone.”
  • “We can’t take mobile payments. You have to come into me at the desk or give your card over the phone. Since we sell mainly programs and very little ‘stuff,’ we don’t have people coming in very often for [smaller purchases].”


  • “With ProPay [which we used to use], I’d click on the website, put in my password and then up would come a page for me to put in the card number on [ProPay’s] website. Then I’d press ‘process,’ and they’d automatically send an email and the charge would go through.”
  • “In a separate business, I’m starting a publishing company, and we’re getting our first book to print. We will use PayPal unless I hear something different.”
  • “I haven’t considered any other options. I was just going to go with PayPal [for the new business] because it’s just one less thing I have to do days of research on, because we know PayPal. If I see that there’s any glitches or anything better that comes up, then I’ll take a look.”
  • “I get phone calls from credit card companies offering various deals, but so far it seems comparable to what PayPal offers.”


  • N/A

7) Owner of a web hosting company

PayPal has reached a certain level of “technology lock-in,” where many are used to it and depend on it despite some frustrations with the service. This vendor does not like PayPal’s high fees for the small purchases made on his site, but believes he cannot remove the PayPal gateway because 90% of his customers choose it over a credit card.

PayPal Engagement

  • “PayPal has reached technological lock-in. But the strange thing is, in my opinion, this technology lock-in has only been accepted by a few. The ones who use it swear by it.”
  • “In my personal life, I am currently having issues with my PayPal account, [but] I have accepted PayPal into my life and currently prefer it over most methods.”
  • “As far as my business end goes, I completely dislike it. One time I was running a special where a prospective customer could try out our services with minimal effort—just a 99¢setup fee to get you up and running with minimal space and bandwidth for the life of the account—and people poured in to try my service. PayPal took 33¢ of each 99¢ purchase. I might as well have paid someone to take cash for me.”
  • “But I can’t remove the PayPal gateway from my site. Statistics, according to [my website], say that for every one person who uses a credit card for payment, nine people will use PayPal.”


  • “I believe a better payment gateway is available. For credit cards, a website such as Pcom could take care of the concerns that PayPal takes care of. But due to people using PayPal for so long, it’s just become ‘the thing’ for people to use.”


  • N/A



Secondary Sources

These three secondary sources focused on Venmo and its competitor Zelle. PayPal took a major step forward in its efforts to monetize Venmo with a deal that allows people to use their Venmo wallets to pay for certain items at Williams-Sonoma stores. A major consortium of banks, meanwhile, launched the Zelle app to take on Venmo. Although Zelle is rapidly gaining new customers, it may have a difficult time getting Venmo users to switch.


Sept. 13 Recode article

PayPal has signed up Williams-Sonoma as the first major retailer to allow customers to pay for items with their Venmo wallets. The deal is part of PayPal’s efforts to make money off Venmo, which is wildly popular among younger consumers for transferring money to friends. PayPal does not get a cut of those peer-to-peer transactions but will take a processing fee for payments made to Williams-Sonoma through Venmo.

  • “Venmo will allow users to pay at merchants like Williams-Sonoma, Chief Operating Officer Mike Vaughan told audience members today at Code Commerce in New York City.”
  • “Users of the peer-to-peer money-transferring service would be able to use their Venmo balance—or charge their bank account—to buy or split gifts with friends on the bridal registry at Williams-Sonoma.”
  • “‘That is very much a traditional retailer that is very innovative that comes from a traditional retail world,’ Vaughan said. Williams-Sonoma CEO Laura Alber ‘was talking about how physical stores are part of their plan, but digital also has to be.’”
  • “Venmo would charge a processing fee to the company to generate revenue, but Vaughan sees it as a benefit to both sides: ‘You bring in new customers to Williams-Sonoma and expand the reach of PayPal,’ Venmo’s parent company.”
  • “Venmo oversaw $8 billion in transactions in Q2 of 2017, double what it did the year before, but has yet to find a way to monetize since the regular service is free. Merchant processing fees from partnerships like Williams-Sonoma would be the first step in making money from transactions.”
  • “Up till now, the Venmo app has served as a way for people to transfer money to other Venmo users or to pay for items in digital apps that have partnered with the company, as well as through some websites that feature its parent company, PayPal. Earlier this year, Venmo started testing a physical debit card in which Venmo customers could use their balance toward purchases at all retailers.”


Sept. 8 Tech Crunch article

A group of U.S. banks has launched an app called Zelle to directly compete with Venmo. It will work similarly but will have the advantage of transferring funds directly to a user’s bank account rather than to a separate wallet. The banks already have a sizable base of customers that make such instant transfers to each other.

  • Zelle, the PayPal rival backed by more than 30 U.S. banks, is preparing to launch its standalone mobile app on Tuesday, September 12th. The move is meant to give the U.S. banking industry a foothold in the person-to-person payments business, where they’re losing ground to services like PayPal, Venmo, Square Cash and, very soon, Apple’s iMessage, powered by Apple Pay.”
  • “While banks have always offered the ability to do instant transfers, the process to date has been more cumbersome. Users would need to have details like a friend’s account number and routing information, for example. That led to the birth of alternative means of sending money, like today’s payment apps where you only need to know information like a username, phone number or email.”
  • “Similarly, Zelle’s new app will allow users to send and request money to and from their contacts, using only their phone number or email. It also will work with U.S. Visa and MasterCard bank debit cards, even if the user’s bank is not yet participating in Zelle’s payment network.”
  • “That network has been in the works since 2011, when Bank of America, Wells Fargo and JPMorgan Chase first teamed up to work on a digital payments solution that would allow their customers to send money to each other through a joint venture then called clearXchange. The consortium dragged its feet, but last year picked up momentum and rebranded to the consumer-friendly Zelle.”
  • “In the new app available on Monday, Zelle users will be able to send instant funds to one another for free, provided both are signed up for Zelle.”
  • “If the recipient doesn’t have access to Zelle through their bank or credit union, however, transactions will take between 1 and 3 days to complete. But unlike PayPal and Venmo, the transfers hit the other person’s bank account more immediately—there’s no final ‘transfer to bank’ step the recipient has to take to have access to the funds.”
  • “The Zelle network already has a sizable user base making instant payments. In the first half of this year, the banks connected through Early Warning handled 100 million instant payments, totaling $33.6 billion—largely before Zelle became available.”
  • “However, Venmo processed $17.6 billion in mobile payments last year, and is increasing that number. In Q2, Venmo saw $8 billion in transactions, or twice as much as the same time last year. And for the first half of the year, Venmo totaled $14.8 billion in payments.”
  • “PayPal, which also owns Venmo, has been working to counter the Zelle threat. It announced in June that it’s also bringing instant bank transfers to PayPal and Venmo, but will charge a flat $0.25 fee for the option. So far, only PayPal has gone live with the new feature.”


Sept. 13 Credit Union Times article

Zelle already is processing a large volume of peer-to-peer transfers as a competitor to Venmo, but most Venmo users are not familiar with it and likely will not switch.

  • “Peer-to-peer player Zelle Network processed more than 100 million transactions in the first six months of 2017 and is racking up thousands of new users a day, but customers of rival Venmo have hardly heard of it, according to two new reports.”
  • “According to a release from Zelle this week, banks and credit unions in its network have seen up to 300% increases in new customer enrollments since June, and more than 50,000 people on average are enrolling daily. Users moved $33.6 billion in the first half of the year, it said. The average financial institution saw a 50% increase in enrollments since June.”
  • “The Phoenix-based company competes against P2P players such as Venmo, Dwolla, Square and even Apple, which announced in June that its new mobile operating system, iOS 11, will allow users to make person-to-person payments directly through the instant messaging feature on their iPhones, iPads and Apple Watches.”
  • “Despite the growth, few people know what Zelle is, according to a study released in July from student loan company LendEDU. It found that 94% of 500 Venmo users it surveyed had never heard of Zelle and 63% said they had no plans to try it. However, 57% of Venmo users did say they would feel more secure making peer-to-peer payments with an app supported by their bank.”
  • “‘Getting consumers to move away from Venmo and towards Zelle is going to be a challenge for the new P2P payment app,’ the study said. ‘Venmo works fine, is easy to use, and has a social media flare to it that appeals to users, especially millennials. Venmo has become so ingrained into our society that the word ‘Venmo’ has become a verb, similar to the way people say ‘just Google it.’”
  • “‘Venmo users using a mobile payment platform would feel more secure using Zelle, an app supported by the banks, over Venmo. But, that does not mean security is a huge selling point for consumers, and even if it was, users are not overly concerned with Venmo’s security safeguards. More than three-quarters of respondents said they were not worried about their information getting stolen on Venmo,’” it added.
  • “Zelle has been available inside the mobile banking apps of several major banks for some time, but this week the company released a stand-alone mobile app in the App Store and on Google Play. It allows almost anyone with an account-issued debit card to send money in real-time through Zelle.”

Additional research by Emily Carr and Dan Weil.