Paypal likely to get hit by competition
Paypal, one of the largest payment processing companies in the US, is likely to face headwinds in the future due to increasing competition from old and new competitors in the payments arena.
The payments industry has witnessed a sharp increase over the last couple of years as more people have shifted to digital payments all over the world and the usage of cash has also come down drastically due to the pandemic when the users have been forced to stay indoors and have been forced to rely on e-commerce websites even for their basic needs. This has not only led to a huge surge in the payments volumes but also led to the huge influx of funds into the sector from various investors. This in turn has led to the creation of a variety of startups that have been able to take on the established players in this space with new and innovative products like BNPL and others.
We have also seen the established players pull up their socks and push ahead with their payments products while certain other companies like Amazon and Apple have also launched their payment products to seize the opportunity. Paypal has also been trying to compete in this space with its products like BNPL and partnerships like those with Amazon but it is clear that it no longer is the dominant player in the industry. It relies a lot on e-commerce websites using its payments services but it is now facing a lot of competition in this industry from Shopify which has captured the small businesses reducing Paypal’s share here to a minor one.
All these are expected to hit the bottom line of Paypal in the coming months though its Venmo business with Amazon and its partnership with Amazon is expected to bolster its volumes. But with Amazon also having its payment platform, it remains to be seen how many of the buyers would continue to prefer to use Paypal for their payment purposes than using the native payment method within Amazon. We had also seen recently that the other large payment company, Paysafe, also reported not so good numbers over the last few months mainly because it has not upgraded its services and platform over the period as the industry continued to push ahead aggressively.