PayPal once a "badass" has fallen behind as Apple Pay has grown its active users at an exponentially faster rate than PayPal. The stock has fallen out of favor & the management scrambles to innovate.
Interesting - I have not heard about that before but i wouldn't be surprised. As Maverick Equity Research pointed out in one of his previous comments - customer support policies are vague, product experience for the core Paypal app used to be a nightmare - especially if a user switched between countries
I have a friend in Thailand who has difficulties with PayPal. The same problems do not occur when he’s in the United States or Mexico where he also has homes. I paid him for a magic trick one time and had to use Western Union. 🙈
this is the first time I think I have ever used Western Union. And then shortly after I had used it somebody had hacked my phone and some of my banking information. A long story. But the short of it is is the heck are head ass cyst my information through Western Union. And almost stole $1500 from my bank account. I can praise Western Union for stopping the transaction and notify me in advance. So much corruption.
So many, it's hard to fathom. Also, be aware, and I’m sure you know once you report fraud and have your credit card re-issued with a new number, all of your automatic debits are moved to the new card. So they continue without you having to change each one. Recently, I was trying to sign up for WhatsApp and accidentally signed up for another service I knew looked like a scam when I researched it. The bank notified me, and we canceled the card. When our new card arrived within an hour or two, that same company charged her card. Because whatever I signed up for was automatic. So we had to change it again. 🙈
I remember in late 2020 when Paypal's CEO had laid out the foundations of his guidance to be the financial super app for everything related to payments. They were laying out all these initiatives without fixing their core issues and they released their 5 year goals which they eventually abandoned last February.
... the golden question most investors are after nowadays. Its become very difficult to find guidance from companies. One of the only companies I know who hasn't abandoned their guidance yet is Snowflake.
Apart from that, companies are just issuing updates to their previous 5-year plans that end in the next 2 years or (in Paypal's case) abandoning it.
Yes. I would still exercise caution to invest here. It is trading at 178x next years earnings so investors are obviously v.v. excited.
But given how much companies are spending on the cloud, this would be great to buy on pull backs.
I have attached their investor presentation (which they updated in August this year) for you which will give you a better understand of their guidance. For their outlook till FY29 turn to slide #29.
Great post. PayPal has faced competition, but has done well to maintain market share. At this price it feels like a no-brainer. The downside is priced in, but not the upside.
I think from a competitive landscape, the worst is priced in for the stock. Though, if a recession hits and consumer spending falls, there could be another sizable chunk of downside left.
Absolutely. We hold similar views of Paypal too. We're also a looking at what the new CEO is going to do with Paypal moving forward especially in such a tough economic backdrop with discretionary purchases topping off.
You are right - it's from the 1990's. But your customer profile would probably be exactly one of the user personas that Paypal would want to go after - and one of they ways they would do that is by buying newer start ups in the fintech space allowing them to build relevance with customer profiles such as yours. They followed this exact strategy when they acquired Venmo a decade ago.
I am curious now - Do you use any payment apps such as Google Pay/Payal etc?
I meant that it feels a bit old-fashioned to me. That's a good strategy to acquire customers with a similar profile as mine, though. I use mostly Apple Pay.
I would agree that PayPal has a bit of a legacy vibe to it, I remember it from when I used to use Venmo during 2015-2020 time period. They have a lot of work to do on that front, especially since they have lost an increasing chunk of people to Apple Pay, like yourself.
PayPal will possibly need to concentrate on the international business where people haven't yet heard of its habit of shutting down accounts based upon perceived ideology, or "incorrect" speech. In the U.S. PayPal has lost clients based upon its more heavy handed practice of cancelling businesses. (It's harder to run a business with the worry that your cash flow could be suddenly halted and locked up.) In 2022, PayPal further offended their U.S. customers, who are accustomed to freedom of speech, with this action: https://fortune.com/2022/10/10/paypal-users-fine-misinformation-aup-error-confusion/
This might be part of the reason they have a new CEO.
Im very curious as well as to what the new CEO is going to steer Paypal. They have obviously alienated their largest user base with obtuse policies and close-looped business strategy. The one problem they do face with their international expansions is that the fintech arena globally is a highly competitive field. And the pandemic has supercharged the competition especially in Emerging Markets. So they face a tough road internationally too with user acquisition.
Have you used Paypal/Venmo for your business? Which digital wallet/Ecommerce checkout solutions do you use?
I used both PayPal and Venmo, but chose Square for my small business, because it seemed safer. PayPal was too political to trust for my own business, (but I had joined it back when it was tied to E Bay). I closed both Venmo and PayPal accounts, when they went off the deep end with their cancellations and that threat of fining people for misinformation.
Well written Amrita. But I'm not sure if crypto is Paypal's antidote to its downfall. That stablecoin was an interesting one. Any reason why they decided on stablecoin out of all things crypto?
Great question, Sully - I'll do my best to compress this all in one comment. But feel free to ask more.
Stablecoins facilitate the flow of currency across borders - geographical borders and blockchain protocols. It likes a medium for someone to transfer their fiat currency into something like BTC etc. Or it may also act as a medium for someone to transfer their fiat currency in one country to their friend who may be living in Vietnam or Nigeria for example.
But in order to do this, the stablecoin needs to hold 'stable' store of value for it to be an attractive proposition to be used by folks around the world. And the entity issuing stablecoin holds value stable by holding an equal or larger amount of the underlying asset. So in Paypal's PYUSD case, Paypal needs to hold at least 1:1 in cash, short term deposits etc. Usually the ratio is higher.
But, Paypal earns an incredible amount of yield by investing all the assets it needs to back its PYUSD. As yields go higher, Paypal would required to add lesser USD because higher bond yields are doing its work.
Plus at the same time, Paypal can also earn fees from transaction usage as more users use PYUSD.
It's too short an explanation but I hope it answers your question.
I think I understand. But Im not sure i will use their stablecoin if I ever wade into crypto. Paypal has a history of byzantine laws to seize assets and close accounts. With all the decentralized chatter going on about crypto I still wouldnt trust Paypal's crypto coin
Thanks Sully. You ask the best questions, I have to admit. On this topic, I am going to have my co-author for the post @uttam dey get back to you on this, since he would be better equipped to answer your question than I.
this will be quite a case ... as a customer, their customer service is sub-par in fixing and even explaining things ... their fees are very very high ... I switched to Wise ... other side, current valuation looks tempting, not a lot needed to move the needle ... :) ... thank you for the coverage, have a good day!
I think that is an investor's top concern right now. Everyone knows that Paypal's system architecture is legacy. They've built new UI on top which looks shiny but their risk, customer support policies and technology is still archaic. BTW... i had too many meltdowns with Paypal blocking me out because they thought I my txn was fraudulent so I switched to Transfer Wise to 6 years ago.
Investors want the new CEO to merge Paypal and Venmo's service to start with apart from all the other new initiatives such as Crypto.
Finance is way out of my wheelhouse, so my comment should be seen as by an average user. I had used PayPal debit as my default card for Amazon and monthly things, as well as for paying people. It was handy because it would effortlessly draw funds from my pp balance and if needed from my bank account. Recently Iv been getting payment declined notices, text and email, suspicious of clicking those links id go directly to my pp website, yet my # showed no record of declined payments. WTF. Getting support via a call, PayPal no longer used my bank account as a backup for online purchases and automatic billing, but contradictory would for sending to someone. The support had the info what was declined, but it was not available to me directly. I had like the card’s flexibility but now that was gone. Plus not having a record of declines and why on its website is plain creepy. There must be millions of people that had my exact experience. I have to wonder if PayPal is testing how much shit their customers will take?
Thanks for sharing your experience, Michael. Almost all the previous execs are either retired or left their positions. It wasn't very clear what their customer strategy was about. Obviously, there are many users such as yourself that are hurt by the myriad policies and it will be hard for PayPal to gain user's trust again. I'm curious what they do next and I'm following commentary to get a clue as to their next steps but they have sort of quiet since the rotation in their executive management I saw last year.
Without PayPal I'd have no repeat clients for my editing and proofreading business. I've had seven projects since the end of July, and all have paid me via PayPal. They can now pay me in Canadian dollars which they couldn't do before, and many more not-for-profits are accepting PayPal for charitable donations and subscriptions. I love PayPal. ApplePay for me doesn't even exist.
You bring up a good point, Carol. For people who want to make cross-border cross-currency payments Apple Pay will not exist as an option because it is available only within US borders.
Some of our readers have reported using another platform called wise.com. But if Paypal is working well for you, why rock the steady boat?
If you don't mind me asking, since how long have you been a Paypal user?
I've used PayPal since 2010, when I wrote short articles for an online DIY site. It has been truly remarkable in consistency and reliability. No hurry for me to switch to anything else. Wise.com has the advantage that you can load it up with funds in $US and then make payments out of that fund in a variety of other currencies.
It was Elon Musk who had the inspiration to start with. He wanted to be the world's bank but the money investors sold out as soon as they got a sure profit deal leaving Musk with only 400 million when he was thinking trillion.
Even in 1998 he wanted his vision of the X super app bundled with fintech solutions to roll out. I guess he is now making sure he finds an investor base who is aligned with his long term vision on the X app.
The fintech space has always been a highly highly competitive field. Every player tries to represent the customer and facilitate their financial transactions collecting economic rent for every transaction they facilitate.
Musk is very focused on transforming X into a super app - and fintech is at the heart of the offerings. He reportedly had given X's employees until the end of 2024 to launch a financial banking entity according to their first all-hands held last month.
Venmo is the only one I use. I am not very involved or knowledgeable about a lot of these high tech things. 99% of the time I just use a debit card. Will pay attention to what Musk does though. Just not sure I need most of these things. Starting to get interested in Crypto finally mostly because of our astronomical debt and ever larger government.
That perspective is why many investors are thinking about diversifying away from US dollar and the usual stock market allocation and into alternate investments because of debt, uncertainty, inflation etc.
We had written a piece about this a few weeks ago and we will start writing about crypto more often since our own outlook about crypto is getting stronger.
Even Paypal knows that Paypal is not a great place. So they acquire fintech brands or build partnerships with other fintech companies and roll it up into the Paypal brand. Take Braintree for example - when you pay for some goods or services online, the payment processing tool maybe by Braintree but it doesn't explicitly say that.
I am not certain if this is true with Apple Pay but I know that PayPal has been known to block users whose ideas don't line up with their own.
Interesting - I have not heard about that before but i wouldn't be surprised. As Maverick Equity Research pointed out in one of his previous comments - customer support policies are vague, product experience for the core Paypal app used to be a nightmare - especially if a user switched between countries
I have a friend in Thailand who has difficulties with PayPal. The same problems do not occur when he’s in the United States or Mexico where he also has homes. I paid him for a magic trick one time and had to use Western Union. 🙈
Western Union by far has the highest fees, if I remember correctly. It is too bad that they don't have consistent service across countries.
this is the first time I think I have ever used Western Union. And then shortly after I had used it somebody had hacked my phone and some of my banking information. A long story. But the short of it is is the heck are head ass cyst my information through Western Union. And almost stole $1500 from my bank account. I can praise Western Union for stopping the transaction and notify me in advance. So much corruption.
Thank goodness, glad you are safe. The number of financial fraud and scams are growing exponentially by the days.
So many, it's hard to fathom. Also, be aware, and I’m sure you know once you report fraud and have your credit card re-issued with a new number, all of your automatic debits are moved to the new card. So they continue without you having to change each one. Recently, I was trying to sign up for WhatsApp and accidentally signed up for another service I knew looked like a scam when I researched it. The bank notified me, and we canceled the card. When our new card arrived within an hour or two, that same company charged her card. Because whatever I signed up for was automatic. So we had to change it again. 🙈
PayPal made some "short-sighted" decisions back in 2021. Payment processing is a competitive space and losing trust can be very hard to get back.
Fully agree with you, they have an uphill battle, though I think from a competitive standpoint, the worst is probably priced in.
I remember in late 2020 when Paypal's CEO had laid out the foundations of his guidance to be the financial super app for everything related to payments. They were laying out all these initiatives without fixing their core issues and they released their 5 year goals which they eventually abandoned last February.
I wonder how companies can lay out 5 year goals in today's crazier than normal climate.
... the golden question most investors are after nowadays. Its become very difficult to find guidance from companies. One of the only companies I know who hasn't abandoned their guidance yet is Snowflake.
Apart from that, companies are just issuing updates to their previous 5-year plans that end in the next 2 years or (in Paypal's case) abandoning it.
I should look at Snowflake, if they have such rock solid confidence to predict.
Yes. I would still exercise caution to invest here. It is trading at 178x next years earnings so investors are obviously v.v. excited.
But given how much companies are spending on the cloud, this would be great to buy on pull backs.
I have attached their investor presentation (which they updated in August this year) for you which will give you a better understand of their guidance. For their outlook till FY29 turn to slide #29.
https://s26.q4cdn.com/463892824/files/doc_financials/2024/q2/Q2-FY2024-Investor-Presentation-vF1.pdf
Great post. PayPal has faced competition, but has done well to maintain market share. At this price it feels like a no-brainer. The downside is priced in, but not the upside.
I think from a competitive landscape, the worst is priced in for the stock. Though, if a recession hits and consumer spending falls, there could be another sizable chunk of downside left.
Absolutely. We hold similar views of Paypal too. We're also a looking at what the new CEO is going to do with Paypal moving forward especially in such a tough economic backdrop with discretionary purchases topping off.
I haven't analysed PayPal as an investor, but I've hardly used it as a customer. It sounds like something from the past decade.
You are right - it's from the 1990's. But your customer profile would probably be exactly one of the user personas that Paypal would want to go after - and one of they ways they would do that is by buying newer start ups in the fintech space allowing them to build relevance with customer profiles such as yours. They followed this exact strategy when they acquired Venmo a decade ago.
I am curious now - Do you use any payment apps such as Google Pay/Payal etc?
I meant that it feels a bit old-fashioned to me. That's a good strategy to acquire customers with a similar profile as mine, though. I use mostly Apple Pay.
I would agree that PayPal has a bit of a legacy vibe to it, I remember it from when I used to use Venmo during 2015-2020 time period. They have a lot of work to do on that front, especially since they have lost an increasing chunk of people to Apple Pay, like yourself.
PayPal will possibly need to concentrate on the international business where people haven't yet heard of its habit of shutting down accounts based upon perceived ideology, or "incorrect" speech. In the U.S. PayPal has lost clients based upon its more heavy handed practice of cancelling businesses. (It's harder to run a business with the worry that your cash flow could be suddenly halted and locked up.) In 2022, PayPal further offended their U.S. customers, who are accustomed to freedom of speech, with this action: https://fortune.com/2022/10/10/paypal-users-fine-misinformation-aup-error-confusion/
This might be part of the reason they have a new CEO.
Awesome perspectives!
Im very curious as well as to what the new CEO is going to steer Paypal. They have obviously alienated their largest user base with obtuse policies and close-looped business strategy. The one problem they do face with their international expansions is that the fintech arena globally is a highly competitive field. And the pandemic has supercharged the competition especially in Emerging Markets. So they face a tough road internationally too with user acquisition.
Have you used Paypal/Venmo for your business? Which digital wallet/Ecommerce checkout solutions do you use?
I used both PayPal and Venmo, but chose Square for my small business, because it seemed safer. PayPal was too political to trust for my own business, (but I had joined it back when it was tied to E Bay). I closed both Venmo and PayPal accounts, when they went off the deep end with their cancellations and that threat of fining people for misinformation.
Well written Amrita. But I'm not sure if crypto is Paypal's antidote to its downfall. That stablecoin was an interesting one. Any reason why they decided on stablecoin out of all things crypto?
Great question, Sully - I'll do my best to compress this all in one comment. But feel free to ask more.
Stablecoins facilitate the flow of currency across borders - geographical borders and blockchain protocols. It likes a medium for someone to transfer their fiat currency into something like BTC etc. Or it may also act as a medium for someone to transfer their fiat currency in one country to their friend who may be living in Vietnam or Nigeria for example.
But in order to do this, the stablecoin needs to hold 'stable' store of value for it to be an attractive proposition to be used by folks around the world. And the entity issuing stablecoin holds value stable by holding an equal or larger amount of the underlying asset. So in Paypal's PYUSD case, Paypal needs to hold at least 1:1 in cash, short term deposits etc. Usually the ratio is higher.
But, Paypal earns an incredible amount of yield by investing all the assets it needs to back its PYUSD. As yields go higher, Paypal would required to add lesser USD because higher bond yields are doing its work.
Plus at the same time, Paypal can also earn fees from transaction usage as more users use PYUSD.
It's too short an explanation but I hope it answers your question.
I think I understand. But Im not sure i will use their stablecoin if I ever wade into crypto. Paypal has a history of byzantine laws to seize assets and close accounts. With all the decentralized chatter going on about crypto I still wouldnt trust Paypal's crypto coin
Thanks Sully. You ask the best questions, I have to admit. On this topic, I am going to have my co-author for the post @uttam dey get back to you on this, since he would be better equipped to answer your question than I.
this will be quite a case ... as a customer, their customer service is sub-par in fixing and even explaining things ... their fees are very very high ... I switched to Wise ... other side, current valuation looks tempting, not a lot needed to move the needle ... :) ... thank you for the coverage, have a good day!
I think that is an investor's top concern right now. Everyone knows that Paypal's system architecture is legacy. They've built new UI on top which looks shiny but their risk, customer support policies and technology is still archaic. BTW... i had too many meltdowns with Paypal blocking me out because they thought I my txn was fraudulent so I switched to Transfer Wise to 6 years ago.
Investors want the new CEO to merge Paypal and Venmo's service to start with apart from all the other new initiatives such as Crypto.
Finance is way out of my wheelhouse, so my comment should be seen as by an average user. I had used PayPal debit as my default card for Amazon and monthly things, as well as for paying people. It was handy because it would effortlessly draw funds from my pp balance and if needed from my bank account. Recently Iv been getting payment declined notices, text and email, suspicious of clicking those links id go directly to my pp website, yet my # showed no record of declined payments. WTF. Getting support via a call, PayPal no longer used my bank account as a backup for online purchases and automatic billing, but contradictory would for sending to someone. The support had the info what was declined, but it was not available to me directly. I had like the card’s flexibility but now that was gone. Plus not having a record of declines and why on its website is plain creepy. There must be millions of people that had my exact experience. I have to wonder if PayPal is testing how much shit their customers will take?
Thanks for sharing your experience, Michael. Almost all the previous execs are either retired or left their positions. It wasn't very clear what their customer strategy was about. Obviously, there are many users such as yourself that are hurt by the myriad policies and it will be hard for PayPal to gain user's trust again. I'm curious what they do next and I'm following commentary to get a clue as to their next steps but they have sort of quiet since the rotation in their executive management I saw last year.
Without PayPal I'd have no repeat clients for my editing and proofreading business. I've had seven projects since the end of July, and all have paid me via PayPal. They can now pay me in Canadian dollars which they couldn't do before, and many more not-for-profits are accepting PayPal for charitable donations and subscriptions. I love PayPal. ApplePay for me doesn't even exist.
You bring up a good point, Carol. For people who want to make cross-border cross-currency payments Apple Pay will not exist as an option because it is available only within US borders.
Some of our readers have reported using another platform called wise.com. But if Paypal is working well for you, why rock the steady boat?
If you don't mind me asking, since how long have you been a Paypal user?
I've used PayPal since 2010, when I wrote short articles for an online DIY site. It has been truly remarkable in consistency and reliability. No hurry for me to switch to anything else. Wise.com has the advantage that you can load it up with funds in $US and then make payments out of that fund in a variety of other currencies.
It was Elon Musk who had the inspiration to start with. He wanted to be the world's bank but the money investors sold out as soon as they got a sure profit deal leaving Musk with only 400 million when he was thinking trillion.
Even in 1998 he wanted his vision of the X super app bundled with fintech solutions to roll out. I guess he is now making sure he finds an investor base who is aligned with his long term vision on the X app.
Elon Musk who I believe started PayPal with some friends is going to make X a big competitor in this field.
The fintech space has always been a highly highly competitive field. Every player tries to represent the customer and facilitate their financial transactions collecting economic rent for every transaction they facilitate.
Musk is very focused on transforming X into a super app - and fintech is at the heart of the offerings. He reportedly had given X's employees until the end of 2024 to launch a financial banking entity according to their first all-hands held last month.
https://www.theverge.com/2023/10/26/23934053/x-twitter-elon-musk-linda-yaccarino-first-all-hands-meeting
Paypal is needs to figure rebuild its strategy fast or they might become disrupted. im guessing you are not a Paypal/Venmo user.
Which digital wallet app do you use, Roger?
You sound like you are a lot more up on these things.
I use them just enough. I have a deeper interest in understanding usage trends across different generations and demographics.
Venmo is the only one I use. I am not very involved or knowledgeable about a lot of these high tech things. 99% of the time I just use a debit card. Will pay attention to what Musk does though. Just not sure I need most of these things. Starting to get interested in Crypto finally mostly because of our astronomical debt and ever larger government.
That perspective is why many investors are thinking about diversifying away from US dollar and the usual stock market allocation and into alternate investments because of debt, uncertainty, inflation etc.
We had written a piece about this a few weeks ago and we will start writing about crypto more often since our own outlook about crypto is getting stronger.
https://amritaroy.substack.com/p/bitcoin-and-gold-outperform-the-s
Really interesting read, I'm always surprised when people say their still use PayPal. It's not a great app or place to store your money.
Even Paypal knows that Paypal is not a great place. So they acquire fintech brands or build partnerships with other fintech companies and roll it up into the Paypal brand. Take Braintree for example - when you pay for some goods or services online, the payment processing tool maybe by Braintree but it doesn't explicitly say that.
https://about.pypl.com/who-we-are/family-of-brands/default.aspx