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When PayPal launched in 1999, online card payments were still a challenge for many merchants. PayPal’s great breakthrough was determining how individuals and businesses could more easily accept money over the web. PayPal’s founders figured out early on that it could make a decent profit in this low-margin business of processing transactions if it could encourage enough users to fund PayPal payments via bank accounts rather than financial cards.
In time, it was speed, convenience and security that made PayPal’s online platform popular, especially among eBay’s small-time sellers. PayPal went public in 2002, and immediately its market value skyrocketed. Within a year, eBay, which once dominated the e-commerce market, bought the start-up for US$1.5 billion, as it realised PayPal was squeezing out its own in-house payment option.
The core component of PayPal’s strategy today still hinges on this online platform that dates back to its roots. Today, the online platform enables its 150 million registered users to send money in 26 different currencies to over 200 countries and territories. Over time, PayPal has also moved into other aspects of financial services, including consumer credit, mobile card acceptance and even card issuance.
Even so, PayPal, which dominated the e-commerce storyline a decade ago, now finds itself fighting to stay relevant as consumers shift their focus to the emerging mobile channel. PayPal today is in the more established role as payment incumbent, facing increased competition from younger start-ups. The entire payments landscape today is filled with innovative start-ups all are aiming to solve problems while siphoning a portion of the payment transaction fees from more established players like PayPal.
PayPal is always at the centre of the next payments innovation. The pioneer of the e-commerce space is now attempting to make inroads in other aspects, including both mobile and in-store payments. PayPal competes in virtually every corner of payments, from its popular online platform to plug-in devices that enable first-time card payments to the relatively new beacon technology that has the potential to revolutionise the entire consumer shopping experience. There are certainly not many companies in payments today that have the breadth and depth of PayPal’s current offerings. The payments space today is changing fast and for all the emerging payments options on the market today, PayPal has a product to compete.
PayPal aspires to be at the centre of virtually every payment transaction, whether it unfolds online when the consumer is sitting in front a computer screen, via a mobile device when the consumer is on the go or in a physical retail store. It wants the end-consumer to opt for PayPal no matter the scenario. To do so, PayPal aims to build an agnostic platform that will allow retailers or software developers to leverage PayPal’s network programmes and hardware to create applicable products to capture these on-the-go payments. PayPal envisions consumers using a PayPal-enabled wallet for all payment transactions, regardless of if they occur through its popular online platform, via a mobile device or in a merchant’s bricks-and-mortar store.
For PayPal, it is not just about the shift from the leather wallet to the digital wallet on a mobile phone. In many cases, it is about no wallet at all. For PayPal, mobile payments or payments on the move are often not about the ability of the mobile phone to conduct a payment, but about the ability for consumers to make payments without having to rely on cash or plastic cards while mobile themselves. PayPal’s head of global communications went so far as in autumn 2012 to ask the media not to refer to PayPal as a “mobile payments or mobile wallet company, but just PayPal.” PayPal wants simply to be known as a commerce company. For PayPal, mobile payments or payments on the move is often not about the ability of the mobile phone to conduct a payment, but about the ability for consumers to make a payments without having to rely on cash or plastic card payments while mobile themselves.
Part of PayPal’s biggest bet is on creating an in-store experience in which frictionless payments become the cornerstone. PayPal hopes this experience will be a major selling point for consumers who are still on the fence about executing payments through these new channels. Together, its revamped mobile wallet and the introduction of PayPal Beacon in autumn 2013 gave users insight into PayPal’s future vision. PayPal hopes that in time both merchants and consumers will recognise the value of its product line because of its ability to create a differentiated and frictionless payment experience across all channels, all devices and all methods of payments.
For further insight into PayPal’s strategy, please see the report entitled PayPal Inc in Consumer Finance (World).