Tuesday , October 4, 2022

PayPal Registered a Record Year in 2020 And Looks for an Even Bigger 2021

Buoyed by an explosion of e-commerce activity following the onset of Covid-19, PayPal Holdings Inc. last year enjoyed what turned out to be a record year for growth. Now, it looks to roll out a flurry of new services. “We released more products and services in 2020 than in any previous year, and we will step up that pace in 2021,” Dan Schulman, PayPal’s chief executive, told equity analysts late Wednesday on a call to discuss the company’s fourth-quarter and full-year 2020 results.

Having added cryptocurrency, QR codes, a point-of-sale installment credit service called Pay in 4, and its Venmo payment platform to the PayPal wallet last year, PayPal now plans to inject a range of budgeting and savings tools, bill-payment options, and shopping incentives from Honey, a company it acquired a year ago, Schulman said.

That promise of excelling 2020’s results, with some products a least, may be hard to keep. The new buy now, pay later service alone registered “the fastest start to any product we’ve ever launched,” piling up $750 million in payment volume in its first full quarter, Schulman said, despite competition from a wide range of companies with similar POS credit platforms.

Schulman: “Consumers no longer want to handle cash.”

Acceptance of PayPal’s QR codes, likewise, is rising fast. Having started last year with big chains like CVS, the barcodes are now triggering payments at more than 600,000 locations, including those of Foot Locker, Nike, Macy’s, and Uniglo. PayPal users that have adopted the barcodes are spending on average 19% more than formerly, Schulman said. “Early in-store results are encouraging,” Schulman told the analysts. “Consumers no longer want to handle cash.”

Overseas, Schulman is eyeing the opportunity in China, particularly with Beijing set to host the Winter Olympic Games in 2022. There, PayPal’s big investment is GoPay, a payment service it acquired late in 2019, leaving it as the only non-domestic company operating a domestic payments service in China.

The record product releases added up to a record year in 2020. PayPal added nearly 73 million net new active accounts, reaching 377 million by year’s end, up 24% over 2019. That figure includes some 29 million merchant accounts. Payment volume came to $936 billion, up 31%, the highest growth rate for this metric in PayPal’s history.

For the fourth quarter, active accounts rose 72% year-over-year to 16 million, including 1.4 million merchant accounts. Payment volume totaled $277 billion, up 39%. The fast-growing peer-to-peer payments service Venmo accounted for approximately $47 billion of that volume, up fully 60%. That figure is likely to grow even faster as PayPal starts implementing Pay with Venmo for merchants online in the second quarter. First-quarter revenue totaled $6.12 billion, up 23% year-over-year.

Still, PayPal’s transaction take rate—the percentage it makes on each transaction—dipped to 2.05% from 2.27% a year earlier. Growth in services like Venmo and other peer-to-peer payments, which historically haven’t produced high margins, contributed to the drop, PayPal said.

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