Dive Brief:
- Digital payments pioneer PayPal Holdings is counting on financial services, such as buy now, pay later financing, as well as its peer-to-peer payment tool Venmo, alongside other services, to drive growth, CEO Enrique Lores told analysts Tuesday in a discussion of the company’s second-quarter earnings.
- Lores, who took the CEO post in March, declined to comment on media reports that the younger digital payments company Stripe may be interested in buying PayPal, saying the company is focused on executing a renewed strategy under his new direction.
- The San Jose, California-based company said it’s also seeking $400 million in cost savings on a run rate basis by the end of this year, showing up more significantly in the fourth quarter and resulting in a $120 million to $140 million charge, the company’s chief financial officer, Jamie Miller, said on a conference call with analysts.
Dive Insight:
Lores took over this year after CEO Alex Chriss fell short of growth expectations, just as his predecessor, Dan Schulman, had as well. PayPal has struggled to keep up growth, particularly at its core PayPal branded business, as younger rivals use newer technology to increase competition for merchant and consumer customers.
The new CEO believes that PayPal can pump up the company’s income by selling more financial services, such as BNPL services, which let consumers buy goods and services on an installment plan, sometimes without fees. For instance, the company has been making BNPL services more available internationally, including in Europe.
“We are really going to be focused on financial services and expanding into that market opportunity,” Lores said on the call with analysts, noting that those services are already growing at a double-digit rate and provide healthy profit margins. “Our strategy is going to accelerate that growth.”
The company is also increasing investments in Venmo and its payment service provider platform offerings to boost revenue. “In both cases, we see opportunities to capture more value,” Lores said.
Nonetheless, competitors, including Stripe, Apple, Block and Adyen have been building their businesses worldwide and are eating into PayPal’s market share, both on the consumer side as well as the merchant side.
Also, some analysts don’t consider Lores’ plan to be a new playbook, noting that his strategies have been tried by PayPal in the past. “We do not see PayPal’s competitive edge in consumer finance, particularly as it is late to market,” analysts at the financial firm William Blair said in a note to clients on Tuesday.
PayPal’s second-quarter net income dipped 12% to $1.1 billion, compared to the year-ago period, as revenue rose 5% to $8.7 billion, according to the earnings press release. The company’s total payment volume for the quarter climbed 10% to $486.4 billion.
Miller said PayPal is now in the early stages of accomplishing the expected 2026 cost savings, partly by eliminating duplication across the company and increasing the speed of operations.
