PayPal Reports BNPL Bounce, More Focus on Financial Services

With its transaction growth rates slowing and less-than-expected revenue guidance for the balance of the year, PayPal focused on its repositioning from a peer-to-peer pioneer to a two-sided payments technology platform in its Q3 earnings call Tuesday (Oct. 29).

Notably absent from the call was any substantial discussion of the financial health of consumers that will drive revenue at the company’s core business, outside of CFO Jamie Miller’s comment that the consumer was ‘strong.’ The focus instead was on new checkout and payments initiatives despite strong results for its core P2P brand and Venmo. The company’s buy-now-pay-later solution was up between 15 and 20%, according to CEO Alex Chriss.

“We’re having very constructive conversations with our merchants focused on ways we can enable strategic growth opportunities that drive long-term upside for both of us,” Chriss told the earnings call audience. “What is different today is that we now have a suite of value-added services including payouts, risk as a service, orchestration, guest checkout and personalization capabilities that help attract new customers and convert them more effectively.”

Chriss also said that the company’s new product experiences are resulting, on average, in more than 100 basis points of conversion lift for vaulted checkout and up to 400 basis points of conversion uplift for one-time checkout.

By the Numbers

PayPal reported a 9% year-over-year increase in total transaction volume for Q3, reaching $422.6 billion, largely due to growth in Venmo and PayPal digital payments. Venmo alone saw a 15% transaction volume increase, while the “PayPal Everywhere” initiative and expanded debit card offerings boosted customer engagement and transaction frequency. PayPal Everywhere — currently boosted by a high-profile Will Ferrell TV commercial — is an enhanced rewards program that allows consumers to receive 5% cash back on a spending category of their choice, capped at $50 per month. Chriss said the company had added one million debit cards since its early September launch and that PayPal Everywhere usage was trending toward groceries, gasoline, and restaurants.

That finding is consistent with PYMNTS Intelligence’s recent work on cash and debit card usage. In the “How People Pay” report “Debit Dominates In-Store Shopping While Credit Owns Online,” it found that shoppers rely on debit cards more than any other payment method, even credit, for everyday expenses. Likewise, consumers continue to prefer shopping for everyday items in person. For example, 88% of consumers like to shop for groceries themselves. In July, consumers used debit for 41% of in-store grocery transactions. Similarly, consumers used debit for 33% of in-person restaurant dining.

Looking ahead, PayPal anticipates Q4 revenue growth in the low single digits, maintaining focus on scaling profitability and bolstering customer acquisition through strategic investments. Both Chriss and Miller commented several times during the call that they expected more growth from strategic investments in payments processor Braintree and more revenue from its Fastlane online checkout technology. Chriss also mentioned recent deals with Fiserv, Adyen and Shopify on the payments side and Amazon Buy with Prime on the merchant side.

“I feel very good about the durable growth there,” Chriss said. “Maybe something we haven’t connected the dots on well enough is all of the innovation that we’re doing with Fastlane and with PayPal Everywhere if all comes back to that durable branded checkout growth. With PayPal Everywhere, we’re starting to see real habituation of people not just getting access to the offline checkout, but also now bringing that back into online.”