Over a year after its divorce from eBay, PayPal is looking at a significant milestone - over $100 billion mobile payments processed in the coming year. To put that into context, the firm has done $200 billion in volume across the whole of the last ten years.
It’s indicative of the success of the new direction for PayPal, reckons CEO Dan Schulman, a future built on partnerships, customer-centricity and being more than just a button someone else’s website. The break-up from eBay has helped bolster PayPal’s positioning as a neutral mobile payments provider, he adds:
Obviously, as we split apart from eBay, part of the premise of that was that as a truly neutral third-party digital payments platform that we could partner with numerous merchants and retailers that might have seen the relationship that we have with eBay as competitive to them and so that we wouldn’t have been independent.
I think a great example of that is Alibaba. We have been nurturing that relationship with them. We’ve done a couple of different announcements through the quarters. We started with wholesalers with them. But now really AliExpress is the main marketplace of Alibaba. That’s where really all their merchants are. And we’ve already started with PayPal being a team in options on that. It’s really a great example of it, because we have great strengths outside of China with consumers.
They have great strengths with merchants inside China, who are already a major cross-border player in the Chinese corridor. So that match would never happen have we not been an independent third party. And that’s happening with numerous retailers as well, especially as we expand our value proposition now to really appeal to a mobile-centric world, that one retailer after another of all sizes are thinking about.
There are obviously two main constituencies that PayPal wants to tap into - the buy side and the sell side - with Schulman arguing that the provider has differentiators for each:
For merchants, we want to be a full service solution provider. As the world move towards mobile, merchants are looking to write applications to take advantage of that mobile across online, in app, mobile web and in store. They are trying to create those applications to enable them to get closer to consumers and create distinct differentiated value propositions.
We basically want to power those applications with our platform. We want to do a 100% share of checkout. We want to integrate rewards capabilities through API and toolsets into our platform. We want to integrate contextual commerce into our platform, credit into our platform, so that merchants of all sizes can write the applications to get them closer to their customers and we can power that with our platform.
And then we take the extensive number of consumers we have, the 177 million consumers we have, on top of the 15 million merchants we have, and we drive those consumers in a friction-free way to be able to sign up for those merchant apps.
For those on the buy side, the objective is to be the “Customer Champion”, says Schulman:
Being a customer champion means always prioritizing the needs of our customers. It means continually reexamining our business to improve the customer experience on our platform, and to provide real differentiated value to both consumers and merchants. By making customer choice a priority for PayPal, we are creating a significantly better customer experience to accelerate adoption and drive engagement.
He points to examples of increased and enhanced functionality and services that have been introduced over the past year, including tie-ups with major credit card providers, such as Visa and MasterCard:
Our customers are now able to set their preferred funding type in their PayPal Wallet to sources other than their PayPal balance. This gives customers the option to default to their favorite debit card, bank account or credit card, and we’ve seen a corresponding increase in engagement.
And as we have demonstrated over the past several months, customer choice is also allowing us to forge valuable new strategic partnerships across the ecosystem. Since our announced agreement with Visa, we have also entered into a strategic partnership with MasterCard, which offers consumers greater choice and flexibility to manage or move their money. It ensures that MasterCard cardholders can easily identify and choose MasterCard within the PayPal Wallet.
Our joint US customers will be able to use their tokenization services to make in-store purchases at MasterCard’s Contactless enabled merchant locations around the world. And along with our agreement with Visa, the deal with MasterCard exempts PayPal from current or future digital wallet fees and provides cost certainty for years to come.
Thanks to our agreements with Visa and MasterCard, PayPal now has a seamless, quick and simple way to activate PayPal payments at the point of sale. Our agreements with payment networks are opening the doors to deeper and more engaged conversations with a host of financial institutions about how to drive incremental spend for their brands and better more innovative experiences for our mutual customers.
One year on from its acquisition of Xoom, PayPal is exploiting its capabilities to enhance its own wider service offerings on the back of integration initially with the PayPal website, but soon with the mobile app. Shulman explains:
As we shared at the time of the acquisition, cross-selling Xoom to our US PayPal customers is a meaningful way to drive additional adoption and engagement with PayPal’s 87 million active US customers.
Xoom is also driving significant innovation. Xoom recently added a new request feature, which allows remittances to become a two-way interaction between senders and receivers for the first time. Remittance recipients in 29 countries can now request funds, bill payments or mobile reloads from customers in the US through the Xoom platform.
Additionally, PayPal customers can now link their PayPal and Xoom accounts, giving customers access to their PayPal funding sources within Xoom. This will allow PayPal’s US customers to send funds to multiple new markets and get access to new services.
This week eBay shares were the biggest decliners on the S&P 500 after turning in declining profits and soft outlook for the rest of the year, while PayPal’s stock had a useful uptick of 4.2% after announcing better-than-expected numbers.
Subscriber numbers are on the up, payment volumes rose 25% year-on-year and the deals with Visa and MasterCard are not having the negative impact of higher transaction expenses that some feared they might.
All that and not having to compete for business with Amazon suggests that there’s little doubt about who’s come out best from the PayPal/eBay divorce so far.