With the global spread of coVID-19, the global shift to digital payments is becoming more pronounced. As one of the promoters, PayPal will be well positioned to benefit in the coming years.
PayPal’s active accounts have grown by 16% annually since 2015. In addition, active accounts grew by 17% and 21% respectively in the first and second quarters of this year.
PayPal’s total payment volume (TPV) in the second quarter was $222 billion, up 29% from the same period last year, and 30% from the same period last year, excluding the impact of exchange rate changes; The number of new active user accounts was 21.3 million, up 21% from a year earlier, bringing the total number of accounts to 346 million, the largest quarterly increase in active accounts in the company’s history.
Paypal expects total payments to grow 30% year-over-year in the third quarter, net revenue to grow 23% year-over-year, revenue to grow about 20% year-over-year in fiscal 2020, and total payments to grow 20% to 29%, with approximately 70 million net new active accounts expected for the full fiscal year
With active users exploding and engagement climbing, will PayPal’s share price take off?
PayPal’s product ecosystem for consumers and merchants makes online and physical digital payments a reality. PayPal’s move into in-store payments could pose more of a threat to independent payment providers, whose service ecosystems are not as large as Square’s.
PayPal monetizes the platform by charging a fee, which varies according to the circumstances. PayPal may also charge a 3% exchange fee. As a result, PayPal may take a 7.4 percent fee on online transactions using PayPal accounts outside the United States that are settled in dollars.
But if PayPal can effectively tap into the in-store digital payments market by using solutions like QR code payments, Venmo credit CARDS, and even their own NFC app, that will drive significant growth in the future.
For merchants, PayPal is like a payment processor that accepts payments in the store with a credit card or digital wallet, such as the PayPal app and even Apple Pay and Google Pay. PayPal also gives merchants the security to accept online payments.
For consumers, PayPal and Venmo are like digital wallets that allow peer-to-peer transfers and, more recently, store payments.
In July 2020, PayPal announced a partnership with payment processor company InComm. The partnership allows InComm to update its cloud software to send PayPal qr codes to retailers across the country.
In October 2020, PayPal introduced the Venmo credit card, which offers consumers another way to spend time in the store. Although it may not have a significant impact on the organization, it further improves the company’s strong network performance by allowing users to interact with the platform in other ways.
The global digital payments market is expected to grow 24 percent a year to reach $12.4 trillion by 2025, according to the study. As a result, PayPal’s potential market size has expanded rapidly.
The global digital payments space is increasingly competitive. Outside of China, where WeChat and alipay is completely dominant, PayPal faces stiff competition from Apple Pay(aapl.us) and Square(sq.us).
According to statistics, the spread of coVID-19 in April made PayPal and Square’s total transactions on payment platforms show a completely opposite situation. PayPal’s transactions were up 22%, while Square’s were down about 39%.
That’s because consumer behavior is changing dramatically. Social isolation has made consumers more likely to shop online and less likely to shop in stores. As a result, Square is stepping up its efforts to offer more digital payment solutions to stores to help them transition to online sales. But PayPal is not standing still, hoping to win more share of in-store payments as consumers return to stores and restaurants.
In addition, Tim Cook said in the conference call on first-quarter 2020 profits that Apple Pay deals are growing at a rate of more than 15 billion dollars per year. By comparison, PayPal handled 13.6 billion transactions in the 12 months to the second quarter.
Investors should pay particular attention to payPal’s efforts on QR code payments using the strategies of WeChat Pay and Alipay in China.
The number of transactions PayPal has processed has risen 25% since 2015, to 13.6 billion in the past 12 months. PayPal’s total payments are growing at an annual rate of 26%.
These figures show that total payments have increased faster than active accounts in recent years. This indicates that user interaction is increasing. In other words, the increasing frequency with which every PayPal user uses PayPal is a very positive sign for the industry.
It could take PayPal’s share price with it
If PayPal continues to innovate and expand the capabilities of its platform, as it has done with qr code payments and Venmo credit CARDS, it is confident that the company will remain competitive in the future.
QR code is PayPaal’s easiest way to expand. Merchants can print their own QR codes to make it easier for customers to pay via payPal or the Venmo app without any contact.
PayPal will become the first foreign payment platform to be allowed to offer online payment services in China. This is a very significant development that has the potential to significantly expand PayPal’s potential market.
Separately, digital payment platform PayPal announced that it will allow users to buy, sell and hold digital currencies such as Bitcoin via their online wallets.
The company expects to expand these capabilities to Venmo and selected other international markets in the first half of 2021. PayPal also plans to allow users to pay its 26m merchants using the cryptocurrency they hold early next year.
The move is a testament to the company’s commitment to innovative measures around digital payments.