PayPal loses checkout dominance: Rivals push the long-standing online payment service

Despite the high profitability of "Branded Checkout," PayPal is losing market share to Apple and Shopify as young users migrate.

2/19/2025, 9:32 AM
Eulerpool News Feb 19, 2025, 9:32 AM

The pioneer among e-payment companies PayPal is increasingly facing resistance. The focus is on the lucrative "checkout" business, the final step in online shopping. PayPal's characteristic "button" still generates around 80 percent of transaction-based net profit, although it accounts for only about 30 percent of payment volume, estimates Mizuho. But investors are nervous: since the release of the figures on February 4, PayPal shares have lost 13 percent. In the past year, the payment volume of the "branded checkout" segment grew by only 6 percent, below analysts' expectations.

New rivals like Apple Pay or Shopify with its in-house "Shop Pay" are making life difficult for the market leader. Mobile usage in particular fuels competition: iPhone users like to pay with a click or facial recognition, a domain of Apple. Younger customers also increasingly turn to such services, while PayPal customers are statistically older. Shopify additionally scores with installment payments and delivery tracking, which resulted in a merchandise volume of 27 billion USD in the fourth quarter — an increase of 50 percent from the previous year.

PayPal's solution for stagnant revenues could be a closer alignment with its in-house app Venmo to reach younger target groups. However, Venmo competes with the banking platform Zelle, which allows free P2P transfers. Meanwhile, the market is punishing PayPal: The stock is 75 percent below its peak from 2021 and trades at only 15 times its P/E ratio, while Shopify's rapid rise has propelled the Canadians to 81 times their earnings expectations.

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