PayPal counts on growing its business beyond payments
- Key insights: PayPal is counting on financial services growth beyond payments to deepen consumer engagement in its multi-year turnaround effort.
- What’s at stake: PayPal CEO Enrique Lores has been attempting to overhaul the business since taking the reins of the company in March, and has sought to cut costs while bolstering branded checkout.
As PayPal pushes ahead with its attempted turnaround, the company expects its banking products, such as loans and credit and debit cards, will play an increasingly important role in driving transaction margin dollar growth.
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“This is true for all segments, [including] consumers and merchants, but also for the three businesses, Braintree,
“Today and in the future, these products offer attractive economics,” he said. “They open a larger [total addressable market] and help us to complement our value proposition to customers.”
PayPal says that Venmo users that use its debit card on and off the PayPal ecosystem had between five- and six-times higher average revenue per account compared with peer-to-peer only users, and that PayPal users that use either their debit card, credit card or buy now, pay later have between three- and five-times higher average revenue per account compared to checkout-only users. And merchants that take out a business or working capital loan have a 15% higher retention rate than those that don’t.
Lores, who was formerly the CEO of HP, has spent nearly eight months since
Those efforts are starting to show results. The company’s transaction margin increased 2% to $4 billion in the third quarter ended Sept. 30, and its GAAP income increased 4.8% to $1.4 billion. The company is on track to hit about $700 million in run-rate savings through the end of the year as a result of increased AI adoption, vendor consolidation, and more than 2,000 job cuts and a 25% reduction in managerial roles.
“We’re really encouraged by the results we’re seeing, but it’s early, and we’ve got more work to do,” PayPal Chief Financial and Operating Officer Jamie Miller said on the call.
PayPal expects non-payment products to contribute more than 20% of transaction margin dollars and grow at a double-digit rate through the rest of 2026. Transaction margin is the company’s “north star” amid its turnaround, Lores said.
Lores also said the company also plans to expand its financial services offering to different geographies and roll out more financial services products, such as a card that allows for buy now, pay later in stores.
Bolstering its financial services offerings beyond payments could provide the company with another avenue to deepen engagement and give customers more reasons to use PayPal beyond checkout, according to Keefe Bruyette & Woods analyst Sanjay Sakhrani, but agentic commerce could be its “opportunity to redefine its value proposition like it once did for e-commerce.
“Agentic commerce could be PayPal’s chance to become more relevant,” Sakhrani said. “While PayPal’s traditional checkout advantage for ecommerce has eroded against Apple Pay,
ShopPay, and other alternatives, its data and network could be valuable assets in its foray
into agentic commerce.”
Agentic commerce is very much a priority, Lores said, referencing the company’s more recent partnership with
“When PayPal started, the key value proposition was around trust and security. This was needed in e-commerce,” Lores said. “This will be even more needed in agentic commerce, and what we are doing is translating that value proposition into the new world.”
