Monday , July 15, 2024

PayPal: Secrets of a Relentlessly Relevant Juggernaut

Staying on top in payments requires close attention to a few ironclad rules, say Saurabh Wahi and Davis Ward.

In the fourth annual Prophet Brand Relevance Index (BRI), PayPal Holdings Inc. was once again, and by far, the best-performing financial-services brand. It’s not just that it continues to outperform such competitors as Visa Inc., American Express Co., and Mastercard Inc. In one key measure—trustworthiness—it even beats digital powerhouses like Inc., Apple Inc., and Alphabet Inc.’s Google.

Although it celebrated its 20th anniversary last year, PayPal manages to feel and behave like a startup. Even as it continually causes disruption through innovation, acquisition, and unexpected partnerships, it fends off constant threats. Yet, it never seems to take its eye off improving core products and services.

How does a brand build such endurance? To find out, we dug deeper into each component of relevance. While PayPal performs well on all four drivers of our Index (customer obsession, ruthless pragmatism, distinctively inspired, pervasively innovative), it soars in three.

First, it ranks fourth among all brands in ruthless pragmatism, where it beats names like Netflix, Android, and Samsung. Second, it scores very highly on certain distinctively inspired attributes. Finally, PayPal excels across certain pervasively innovative measures. A closer look at those numbers reveals three lessons PayPal can teach all brands about becoming more relevant to their customers:

Create ever-improving experiences

Ruthless pragmatism is all about delivering the experiences that consumers expect—when, where, and how they need them. PayPal eclipses almost every other financial-services brand on the important attributes of “makes my life easier,” “delivers a consistent experience,” and “I know I can depend on.”

That’s because PayPal knows that what matters most to people is the experience of each interaction. Are transactions fast? Hiccup-free? Intuitive, whether it’s a one-and-done mobile purchase or an elaborate desktop order?

The company constantly redefines its digital experiences, with the latest version of its app making it even more seamless to send and receive funds. It recently introduced “smart buttons” as checkout options for merchants. Using artificial intelligence (AI) to detect what type of payment you are likely to use, it cuts down on Web-site clutter. This is a seemingly invisible change to consumers, yet makes for a quick and pleasant experience.

As a result of these investments, consumers see PayPal as a brand that is devoted to helping them manage their daily financial lives. That’s why it also scores so highly on “meets an important need in my life.”

Inspire your audience

A key to being distinctively inspired is earning the trust of consumers. Of the thousands of brands we measure, PayPal ranks fifth in trustworthiness. Not only is PayPal far ahead of other payment methods (only Visa, at No. 42, even makes the top 50) and financial brands, it’s seen as more trustworthy than Amazon (No. 6), and is far ahead of Apple (No. 33) and Google (No. 117).

In an environment where data security is top of mind, PayPal’s history of working hard to build trust with its consumers is paying off. Within our smart and connected landscape, the wallet is sacred when it comes to trust. When people see the PayPal button on a Web site, they breathe easier when they buy.

It also does a better job of conveying its commitment to safeguard users. These measures include the recently-advanced authentication features, 24/7 fraud monitoring, and instant account notifications.

Another way that companies inspire people is through brand purpose. PayPal rates higher in “has a purpose I believe in” than any other financial brand. This metric could reflect the company’s growing efforts to become a social engine of change through programs like LoanBuilder and PayPal Working Capital.

And its new deal with Walmart Inc., allowing customers to deposit and withdraw cash for a small fee in stores, is perhaps its biggest commitment yet to helping the millions of Americans who earn too little to have a bank account.

Make innovation an everyday obsession

In its quest for pervasive innovation, PayPal seems to be pursuing newness in three areas. First, it’s concentrating on organic and internal inventions, including the increasing use of AI and early forays into blockchain.

Next, it uses acquisitions to broaden and modernize its offerings. Besides owning Venmo, which infuses PayPal with vast amounts of data about how Millennials use payment services, it recently bought: iZettle AB, a $2.2 billion deal that expands the tools and platforms it can offer small businesses; Jetlore Inc., an AI startup focused on personalizing commerce experiences that can predict what color, size, and styles customers choose; and Hyperwallet Systems Inc., a $400 million deal for a company that distributes payments to merchants in multiple currencies. And, earlier, it added Xoom Corp., which lets people transfer money and pay international bills easily.

Finally, PayPal expands its ecosystem through key strategic partnerships. It thrives by bringing other companies, sometimes even competitors, into its tent, including Apple, Samsung Electronics Co. Ltd., Facebook Inc., Google, Visa, and Mastercard, as well as banks like JPMorgan Chase & Co. and Bank of America Corp.

Of course, no brand is future-proof. There’s no guarantee that PayPal’s two decades of success can safeguard it from what’s ahead. For example, Zelle, the payments platform launched by a consortium of 30 large banks, is coming hard for Venmo, and leading forecaster eMarketer expects it to barrel past Venmo this year.

But what’s clear is that PayPal’s commitment to pragmatism, inspiration, and innovation makes it continually more relevant and meaningful to consumers, and very hard for competitors to dethrone.

—Saurabh Wahi is a partner, and Davis Ward an associate partner, at Prophet, New York City.

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