Editor's note

JUNE 2018

ISSUE 2

PayPal on the march

At first glance, the purchase price of $2.2bn seemed hefty and way in excess of what the writer would have forecast but the strategy underpinning the deal makes perfect sense.

Following the deal, PayPal is perfectly positioned to compete with other payment tools (including cash, card and ApplePay) at point of sale can accept in-store payments, in particular from small merchants.

As Vladimir Vukicevic, head of Payments at GlobalData told Verdict:‘‘PayPal has a strong position in the online payments environment but so far it hasn’t had much success in growing its share of in-store payments. This acquisition will help to establish PayPal as a significant player in the in-store payments environment, especially in Europe.

“The move will mean that PayPal, known as a payments tool, will be able to expand into the instore payment acceptance market with the potential to quickly grow its markets share in this segment on the back of its good reputation for secure payments and a flawless payments experience.

At the last count, PayPal had over 220 million active accounts generating over 2 billion transactions per quarter.

And PayPal is not finished yet. It maintains it is not set to transition to become a fully fledged bank-it does not have nor want a banking licence – but it continues to expand its range of traditional banking services.

Through a series of partnerships with small banks in the US, it has been offering personal loans and debit cards.

It launched a Mastercard prepaid card as long ago as 2012 in the US.

So in brief, PayPal is doing perfectly nicely without the need of a bank licence; it is ramping up its efforts to compete with Square and will expand in commercial payments and lending to small businesses especially in the physical retail sector.