I agree with you on the competition. But the upside at PayPal is revenue through offers and advertising, using their amazing purchase data. They can really send you the ad that will convert a lot. They can also roll out a marketplace within their app. Payments is just one part of a future PayPal monetization that is aimed at customers, if the management executes. The goal is the super app, even if it is only for a smaller group of hardcore users.
Nice write up. Your thoughts are similar to mine. A few points - I think the focus on account growth or decline is a bit overblown - PayPal has over 430 million active accounts. That’s a huge number. To put it into perspective, that’s equal to every adult in the United States, Canada, Germany, the UK, and Australia. To expect a lot of growth from this point isn't realistic in my view. Transaction growth is the more important metric.
I also think that while PayPal's moat with consumers is getting a bit weaker, the moat with merchants is getting significnatly stronger. Between PayPal's excellent fraud protection, ability to offer buy now pay later, innovations like complete payments and fastlane, they're the only payment provider that can go to a business and say "use us for your payments and you'll make more money." They have plenty of data to back up that kind of claim.
A Neilsen survey showed
- 28% higher conversion with PayPal checkout
- a 19% increase in unplanned purchases
- a 13% increase in repeat purchases
- and an 8 point gain in NPS
With that kind of advantage, PayPal should be able to raise margins on Braintree. Chriss has said he plans to do just that. There are still execution risks of course, but I think the sentiment around PayPal is way too negative.
Their Advertising idea is a good one.
Definitely!
I agree with you on the competition. But the upside at PayPal is revenue through offers and advertising, using their amazing purchase data. They can really send you the ad that will convert a lot. They can also roll out a marketplace within their app. Payments is just one part of a future PayPal monetization that is aimed at customers, if the management executes. The goal is the super app, even if it is only for a smaller group of hardcore users.
I agree! Very true. The company has plenty of opportunities.
Awesome write up Daan. I’ve spent hours and hours researching PayPal and I still managed to get a load of value from this article. Thanks man!
Nice write up. Your thoughts are similar to mine. A few points - I think the focus on account growth or decline is a bit overblown - PayPal has over 430 million active accounts. That’s a huge number. To put it into perspective, that’s equal to every adult in the United States, Canada, Germany, the UK, and Australia. To expect a lot of growth from this point isn't realistic in my view. Transaction growth is the more important metric.
I also think that while PayPal's moat with consumers is getting a bit weaker, the moat with merchants is getting significnatly stronger. Between PayPal's excellent fraud protection, ability to offer buy now pay later, innovations like complete payments and fastlane, they're the only payment provider that can go to a business and say "use us for your payments and you'll make more money." They have plenty of data to back up that kind of claim.
A Neilsen survey showed
- 28% higher conversion with PayPal checkout
- a 19% increase in unplanned purchases
- a 13% increase in repeat purchases
- and an 8 point gain in NPS
With that kind of advantage, PayPal should be able to raise margins on Braintree. Chriss has said he plans to do just that. There are still execution risks of course, but I think the sentiment around PayPal is way too negative.
I agree! You make some good points.