Never Underestimate the Power of PayPal

Categories: Banks,blog,mastercard,Payments News & Insights,PayPal,Visa

Posted on June 25, 2018 by

Credit cards are king. That seems to be the gist of a recent study by Stripe rival 2Checkout, which also shows momentum for PayPal. But there is more to the numbers than meets the eye.

The study showcases significant regional variations in terms of preferred payment methods, with consumers in countries outside the U.S. favoring local options like iDEAL (Netherlands, 43 percent), Alipay (China, 42 percent), local credit cards (Brazil, 28 percent), Carte Bancair  (France,12 percent ) and JCB and Konbini (Japan, with 19,5 percent and five percent).

So far, so good…but let’s look further. Specifically, according to 2Checkout, Visa and Mastercard “continue to dominate” on the global front, accounting for 68 percent of global online sales. Online global transactions completed using a PayPal account are said to generate only 19 percent of these sales; American Express, 7 percent of these sales. But what the study doesn’t seem to take into account, however, is that a goodly amount of the PayPal transactions that make up the 19 percent could be backed by a Visa or Mastercard card or a bank account. Consequently, the margin by which Visa and Mastercard “dominate” is as wide as the numbers seem to indicate.

Moreover, it’s important to note that no matter the payment instrument, payments are becoming seamless. Increasingly, consumers are demanding the ability to make one-click payments. It doesn’t matter whether these payments are executed through PayPal via some other method—just that they are seamless. And PayPal is continuing to add to its arsenal not only to achieve this seamlessness, but also to leverage existing payment networks to become the payment “brand” of choice rather than the “fifth network” as speculated in past years. Its recent acquisitions—including the most recent additions of iZettle and Hyperwallet to its arsenal—are proof of that. In fact, the HyperWallet acquisition should yield PayPal the entrée into international money remittance it needs in order to serve small businesses and, eventually, larger ones.

PayPal’s moves to induce consumers to want to use it rather than Visa or Mastercard as the preferred form of payment comprises more fodder for our argument. This is quite a feat, given that PayPal’s advertising budget is spent online and with retailers. (As an aside, it is also fodder for the argument presented in our previous blog—that banks are becoming increasingly irrelevant in the scheme of consumer payments.)

There is no doubt that PayPal will continue along its path of establishing and maintaining a major brand identity. It’s more than a network—and its power to alter the payments landscape is as evident as it comes.

Author: E&S Consulting

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