There are those who say that Paypal is mismanaged and that it is the AOL of the payments industry. They note that it is a laggard and will likely face disruption from companies like The Block or other up and coming fintech companies. But is that accurate? Is Paypal a company of yesteryear that will fall by the wayside while a younger company takes the lead in this fintech space?
Many people might have started using Paypal when they started selling on eBay a long time ago, others might have started to use it standalone when they saw initial promotions it offered, offering cash incentives to sign up and use the platform.
It has come a long way since the early days, over twenty years ago.
Paypal Is Now In Several Financial Segments
The financial firm continues to make it to where individuals can send money to each other online. That is still a primary function of this large financial technology services firm. You can turn to the main platform to conduct your transactions as you buy goods or services from merchants (checkout) in many different countries.
You might be surprised to note that Paypal acquired several firms that you use on a regular basis.
- Bill Me Later
- Happy Returns
Users that have a Paypal account can benefit in a wide variety of ways. They can send money to friends, family, associates, and vendors. They can borrow money with Paypal Credit or the Paypal credit card and they can participate in Paypal’s buy now pay later program. Users can also buy and sell digital assets on Paypal as well.
How Does Paypal Make Money?
The firm Makes Money From transactions and other value added services. A large portion of its earnings come from the various transactions it processes daily. A small segment of these earnings comes from the other value added services section. If the firm is able to have more accounts or more utilization from the already present accounts, it can increase earnings.
Paypal relies on transaction volumes to increase revenues, as more users create accounts and conduct their transactions, they benefit. One can expect this in boom times but the opposite would be true for times of poor economic growth. If the economy declines, transaction volume is likely to decrease as well.
Growth Opportunities For Paypal
Growth opportunities for Paypal come from connecting browsing sessions to transactions. For instance, an avenue of growth could be Pinterest, if the goal of Pinterest is to help merchants connect with consumers through visual ideas, then having a seamless payment processor, like Paypal could be a great addition.
It is no surprise that Paypal is looking at acquiring Paypal, at least, there were rumors of such an acquisition in 2021. It would have been more expensive to purchase Pinterest last year, it is now cost-effective and more feasible to purchase Pinterest. Pinterest would benefit from making the platform much more seamless when it comes to conducting transactions. Pinterest community members can go from ideation to closing the transaction with Paypal integrated into Pinterest.
At the same time, the growth from Pinterest would have to be significant. How long would a Pinterest acquisition take to pay off? Could Paypal not simply do a partner agreement with Pinterest and start the integration process after the deal? No need for an acquisition, just a simple deal? Or does it require more integration and full ownership of the company, for it to work out well?
Paypal Requires Growth
Paypal is set to increase revenues to over $27 billion this year. The firm has been improving its internal software shipping platform to become more agile and nimble. After all, if it seeks to compete in a tech led environment, it needs to have this fundamental aspect locked in.
The software update and product development process improvement will allow it to also develop new products. If the company can conduct feasible research and development and create compelling products, that would be a significant value add to the firm. But can it? Many large firms struggle with making the right level of progress when it comes to deploying innovative products that delights customers.
It would be very interesting to see if Paypal can create compelling products and lead the industry with these fintech offerings.
Another factor to pay attention to here is regulatory compliance, Paypal, under the leadership of Schulman, is investing more into regulatory compliance. This has led to opportunities such as the GoPay acquisition that has enabled Paypal to be the first foreign payment provider with a coveted license and full ownership of a payment platform.
Now, while regulatory compliance is essential, does Paypal really need to have over 3,500 people on the regulatory compliance team?
Anyway, the firm does have a global presence and it looks like it is taking the right steps to stay relevant for the next decade.
If the company can stay nimble, improve its software development process, and stay ready to seize opportunities, more opportunities are there as more people shop online. Since Paypal is a global company, it benefits from this worldwide infrastructure and distribution.
It can look at the market and roll out products like Buy Now Pay Later and present it swiftly with its compliance platform and distribution power.