When it comes to digital payment systems, Paypal has made quite a name as one of the fastest-growing and highly adopted systems out there. Paypal has been a major payment system when it comes to online shopping. During the pandemic, it went through exponential growth both in its revenue stream and usability. In 2019, the company had revenue of $17.8 Billion which took a boost in 2022 as they made about $27.5 billion.
And now? Their stock growth is gradually declining and the company is struggling to hold its position in the market. Let’s find out why?
Paypal & eBay
Before delving any further, we have to talk about Paypal’s earlier relationship with eBay. They have a long-standing relationship that dates back to PayPal’s early days. eBay was one of the first online marketplaces to accept PayPal as a payment method, and PayPal quickly became the default payment option for eBay transactions.
PayPal’s integration with eBay helped to drive the company’s early growth and popularity. As eBay grew, so did PayPal’s user base, and many eBay sellers began using PayPal exclusively for their transactions.
In fact, eBay was such an important part of PayPal’s business that in 2002, eBay acquired PayPal for $1.5 billion. PayPal continued to operate as a subsidiary of eBay for more than a decade, but in 2015, the two companies split into separate publicly traded companies.
Even after the split, PayPal and eBay continued to have a close relationship. While eBay has expanded its payment options to include other providers, PayPal remained a popular payment method on the site, and many eBay sellers continued to use PayPal as their primary payment processor.
Rise & Fall
Paypal reached an all-time high during the pandemic. Naturally, consumers had to rely more heavily on online transactions, which led to a surge in PayPal’s overall growth. As mentioned earlier, the company’s yearly revenue increased from $17.8 billion in 2019 to over $25 billion in 2021. Additionally, during this time, the company’s stock reached a new height as well. The stock went up by more than 78% which was like anything the company has experienced before. However, once pandemic restrictions began to lift, PayPal’s stock started to weaken and within a year, it had lost most of the gains it had made during the pandemic. This was due to a string of disappointing earnings records.
Reasons for Lagging
Now there are more underlying reasons why Paypal is lagging behind and slowly losing its throne. Nowadays, many major tech companies have developed their own online payment platforms, and even large banks are getting involved. The Shop Pay button from Shopify and Amazon’s Checkout with Amazon Pay, for example, is becoming a growing competition. However, the biggest threat is Apple Pay, which showed better growth than any other payment method during the last holiday shopping season. Certain incidents such as the Misinformation Policy of PayPal also added to Paypal’s struggle where they were to charge $2500 for any misinformation provided by the users. Additionally, PayPal and eBay had an operating agreement that ended back in 2020, contributing to PayPal’s slower growth.
Despite this, PayPal’s role in the fintech industry is far from over, and it remains well-positioned to grow in line with e-commerce in the foreseeable future. While it may no longer be viewed as the preeminent leader in digital wallets and digital payments, the long-term picture still looks bright for PayPal. On top of that, PayPal’s separation from eBay has been followed by plans to merge with Amazon, which can potentially provide a substantial and more extensive revenue stream, surpassing what they had with eBay. While the integration may take some time, the collaboration can significantly benefit PayPal’s future operations. And lastly, It is crucial to take into account the expansion of the digital payment market. It is projected that the global digital payment market will reach $12.5 trillion by 2027, with an annual growth rate of approximately 11%. As a well-established payment processor, PayPal is likely to reap substantial benefits from this growth trend.