One of the biggest success stories of the original dot-com era, PayPal has seen its territory steadily conquered by new and existing competitors.
PrevNextOne of the biggest success stories of the original dot-com era, PayPal has seen its territory steadily conquered by new and existing competitors. (Scripps News)
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The biggest threat to PayPal’s dominance has been Apple and its Apple Pay service. Apple rolled out Apple Pay in 2014, which allowed Apple customers to store virtual credit and debit cards on their devices to pay online. The company also integrated tap-to-pay technologies into iPhones and the Apple Watch to allow Apple users to pay for items at stores in person.
So, while PayPal has embedded itself as a checkout button on countless merchant websites, that checkout button has become less useful when a customer can store their payment information on their phone and pay using a fingerprint or a glance of their face, analysts said.
This has caused customers to drift away from PayPal as a default payment method. PayPal in 2019 controlled roughly 9% of e-commerce in the U.S. and globally, with Apple Pay having a 3% market share, according to analysts at UBS. Six years later, Apple overtook PayPal as the dominant checkout option, and its market share is expected to continue to grow as Apple rolls out Apple Pay to non-iOS users.
There is also the growing popularity of buy now, pay later companies such as Klarna and Affirm. While PayPal now offers buy now, pay later services like its pay-in-four plan, and longer-term monthly payment plans, it lags its major competitors including Affirm, which was founded by one of PayPal’s founders, Max Levchin.
“PayPal has had a lot of trouble evolving from being just a way to pay on your desktop computer,” said Sanjay Sakhrani, an analyst who covers credit cards and payment methods at investment bank Keefe Bruyette & Woods.
MORE business continues to lag behind it competitors, it could spell future trouble for PayPal. Wall Street analysts have questioned whether Venmo or Braintree may be spun off from the company, noting that Lores was previously responsible for spliting HP into two separate companies.
Earlier this year, PayPal’s stock jumped briefly on unconfirmed reports that the payments company Stripe was interested in acquiring all or parts of PayPal.
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