Over the last few years, PayPal has had the weird privilege of reading its own obituary an unusually large number of times — a somewhat surprising development given that the firm has been growing consistently for almost two decades.
For a while there — particularly in the run-up to its split from long-time parent firm eBay and the immediate aftermath — there was a never-ending series of stories suggesting that Apple Pay would be PayPal’s demise or that the card networks/issuers were out to put a pox on its digital wallet house and it would be crushed.
But the only crushing going on, it appears, is what PayPal has been doing with the analysts each quarter. PayPal was reported by many in Q2 as having “crushed it.” The core product’s user base is up to 188 million active users, who use it an increasing number of times each year. Merchant acceptance is expanding and now clocks in at 14 million. Braintree volume is growing explosively, and Venmo seems to have this miraculous ability to make the act of paying a social event that adds up to billions every quarter amongst those beloved millennials.
And while all eyes have been on PayPal, PayPal’s eyes have been on scale, Head Of Global Core Payments Jim Magats told Karen Webster in a recent conversation. Building, developing, consolidating and diversifying. Because, Magats said, PayPal is more than just a payments network that connects consumers and merchants in a variety of ways — though that is an important part of what it does and what it’s known best for, right now.
But what it wants to be known best for, Magats noted, is a much bigger vision. That vision is to be the global platform of choice enabling the payments ecosystem to fulfill their digital ambitions — the consumers, the merchants and the card networks/acquirers.
In some ways, that’s easier for PayPal than most, noted Magats, since, from the word go, PayPal has been about casting a wide net, as opposed to maintaining a walled garden, like some of the device-linked payments plays that have emerged. While those services may well get traction at some point, Magats noted, getting scale is more of a challenge when you’ve intentionally cut yourself off from large swaths of the consumer population.
“We already have over a billion financial instruments on file. Our challenge isn’t the first-mile problem that many others have; that problem we’ve solved in spades,” Magats said.
What has been a challenge, Magats suggested, is that last mile, especially since it required the enthusiastic participation and collaboration of card networks and issuers who have a long history of casting something of a jaundiced eye at PayPal and its ACH legacy. But this week, with the big Mastercard announcement, following as it did a similar announcement by Visa over the summer, indicates that a new era of mutual cooperation is about to begin, meaning that last mile just got a lot shorter and much easier to run.
So, Why The Sudden Network Lovefest?
Card networks and issuers, until recently, have had something of an ambivalent relationship with PayPal. That ambivalence is rooted in PayPal’s legacy of moving consumers off the card rails and onto the ACH rails, which advantaged PayPal’s economics.
And while Magats agreed that the history between PayPal and the card rails has complicated that — complicated because PayPal also drives a lot of volume to the card networks — the days of trying to shift customers away from their cards to their bank accounts are relics of the past.
“This isn’t something we woke up and decided to do a couple of months ago. We have known, at its essence, being a customer champion means working seamlessly with the methods of payments that consumers want to use,” Magats said.
Magats said that PayPal’s 2016 summer deals with the networks and its forthcoming move to build on its relationships with the issuers themselves represent the “emerging truth” of the digital landscape: The world needs an open digital platform where all the payments participants can meet equally because that’s the only way any one of them can make the customer payments and commerce experience better.
“The only way for any one of us [the various mobile payments and commerce players] to gain is for us to work collectively, and then, we all gain. We firmly believe that, as digital continues to evolve, there will be enough economic gain to make it worthwhile for everyone.”
Delivering The Gains
It’s complicated to be the platform to deliver the gains to everyone in the system as a fair arbitor, because, as Webster noted, PayPal, via Braintree, is making it easier for competitor “buy buttons” to occupy real estate that might otherwise have been PayPal’s alone — or alone for a lot longer.
Magats said that’s just part of what it means to be an open platform — it is, by nature, inclusive and participatory or it loses its value.
The bigger vision, he said, of being a global transaction platform is more expansive and more important to its long-term game than winning the “buy button” war on any individual merchant page.
“If we want to move from being thought of as a ‘button’ to a full-service eCommerce solution for merchants, we have to be able to provide a complete solution. That means strategically giving issuers and merchants options that give their customers choice,” he emphasized.
The commerce world is changing and, as Webster noted earlier this week, may well have reached and passed its online inflection point. The mobile play for how it will evolve has yet to be determined.
PayPal is positioning itself to be everywhere and to make it possible for everyone else to be there, too. And it means everyone — consumers, merchants, card networks and issuers. PayPal thinks it is the one platform that get them all to the same party.
“Soon, you’ll start to see the experiences that we’ve been incubating in markets where they can scale. Now, with our platform and our partnerships, it’s a great time to get those ideas out there and watch them take off.”