PayPal Holdings Inc.’s payments juggernaut shows no signs of weakening, but the company has found its latest product integrations bedeviled by slowdowns, forcing it to postpone some expected revenue.
One such integration with bill-payment specialist Paymentus Corp. is a crucial one because it will allow PayPal to enter an enormous, yet for PayPal a wholly new, market. But PayPal chief executive Dan Schulman on Wednesday told equity analysts the complexity and size of the task have caused a delay.
Bill pay is “an extremely important vertical,” Schulman said on the conference call. But the task with Charlotte, N.C.-based Paymentus involves “integrating all their billers into our platform, into our app,” he added. “It’s going to take a little bit longer than we expected. The revenue is delayed, not lost.”
PayPal managers did not break out delayed results by project, but the combination of longer-than-expected integrations, pricing changes, and foreign-exchange headwinds have led the company to revise its full-year revenue guidance downward from a range of $17.85 billion to $18.1 billion to a range now of $17.6 billion to $17.8 billion.
Still, PayPal isn’t shying away from pouring money into ventures where it sees opportunity. Long a processor for Uber, PayPal plowed $500 million into the ride-share giant during the second quarter. This follows a $750 million first-quarter investment in Mercado Libre, an Argentina-based online marketplace that PayPal is promoting in place of erstwhile partner eBay Inc.
“Mercado Libre is going to significantly expand our international scale and scope. PayPal customers will be able to buy from Mercado Libre merchants. There’s a tremendous amount of incremental opportunity,” Schulman said.
PayPal reported $98 billion in payment volume from its top 20 marketplaces and clients, up 36% year-over-year, but registered a 3% drop in volume on eBay. This result follows eBay’s move last year to demote PayPal to one of many payment methods while relying on Dutch processor Adyen N.V. for gateway services.
But while PayPal has made these major investments, Schulman said the company isn’t looking to make any big acquisitions. In recent years, it has executed what the San Jose, Calif-based processor calls “tuck-in” acquisitions like those of European point-of-sale payments provider iZettle and U.S. cross-border payments specialist Xoom.
That trend looks likely to continue. “We’re looking to do between $1 billion and $3 billion in tuck-in acquisitions,” Schulman said. “We look at hundreds of potential acquisitions every single quarter. We expect to be acquisitive.”
Pressed by analysts who pointed to the mega-deals major payments processors have negotiated just since January, Schulman said these combinations, which haven’t closed yet, “don’t make me feel there’s a need to do larger acquisitions. I never rule out a larger acquisition, it just needs to clear a higher hurdle.”
But if ensnarled integrations were slowing down some revenue, peer-to-peer payments continued to sizzle for PayPal in the April-through-June quarter. Total P2P volume came to $46 billion, up 40% year-over-year and 27% of total payment volume. That’s just ahead of the $44 billion PayPal’s hottest rival, bank-sponsored Zelle, posted for the same period.
PayPal’s Venmo service accounted for more than half of that volume, with $24 billion in payments, up 70%. The other components of P2P activity for PayPal include traditional PayPal transactions and activity through Xoom.
But PayPal continues to struggle to make Venmo deliver revenue. In large part because of the free transfers, the company’s take rate—the percentage of each transaction it keeps—fell 13 basis points to 2.25%.
To offset this trend, PayPal has promoted fee-bearing services based on Venmo, like instant withdrawal, a Venmo card, and Pay With Venmo, an e-commerce service. On these services, some 1.5 million Venmo users have performed a “monetizable” transaction, Schulman said, letting PayPal draw user or merchant fees. The instant withdrawals alone account for about half the take, he added.
All in all, PayPal logged $172 billion in total payment volume for the quarter, up 26% year-over-year, on 286 million active accounts, up 17%. These accounts include 23 million merchants. Transactions per active account came to 39, up from 35.7 a year ago.
Mobile transactions accounted for $73 billion in volume, up 37%. At 43%, this activity is closing in on half of PayPal’s total payment volume.Revenue for the quarter totaled $4.31 billion, a 12% gain year-over-year.