Apple Pay is Closing in On PayPal
August 2, 2018
According to Apple’s quarterly earnings that were released on Tuesday, Apple Pay transactions tripled from last year at the same time to more than 1 billion transactions. CEO Tim Cook said during Apple’s recent earnings call that this is more than Square did in the last quarter and exceeded the number of mobile transactions via PayPal. PayPal, the industry leader, reported 2.3 billion transactions over the last quarter. This still puts them well ahead of Apple Pay, by 1.3 billion; but not as far ahead as last year, when PayPal led by almost 1.8 billion.
Apple also reported today that it hit a $1 trillion market cap. The success of Apple Pay is further confirmation that giant technology companies are also becoming fintech companies. Google has the Google Pay service and Facebook’s WhatsApp is rolling out a payment feature. To keep up with fintechs, last year, a group of the largest American banks (including Bank of America, Wells Fargo and Capital One) launched Zelle, a peer to peer payment service. So far, Zelle has proven to be a good idea.
According to eMarketer, a research firm, Zelle is expected to surpass Venmo this year in terms of users. With these expectations, Zelle will grow by more than 73% in the US, to 27.4 million users by the end of the year, outpacing Venmo (owned by PayPal), which should have 22.9 million users and Square Cash, which should have 9.5 million.
90% of PayPal Merchant Advances and Business Loans Are Performing On Pace
July 28, 2018
As of June 30, 90.6% of PayPal’s merchant advances and business loans were performing within the original expected repayment period, the company disclosed this week. That equated to $1.27 billion worth of deals. Only 4.2% of their merchants were more than 90 days behind their expected pace.
PayPal had $1.4 billion in outstanding merchant loans, advances, interest and fees receivables.
Swift business loans are charged off when they are more than 180 days past due. The Working Capital products (which can be loans or advances) are charged off when the merchant is 180 days past the company’s original expectations and no payment has been made in the last 60 days OR when the merchant is 360 days beyond the company’s original expectation.
Swift Business loans are generally repayable over 3-12 months. Working Capital advances are generally expected to be satisfied within 9-12 months.
After PayPal acquired Swift Financial, the company began marketing itself to small businesses as LoanBuilder. A flyer obtained by AltFinanceDaily showed that it was being marketed with loan amounts of $5,000 to $500,000 that could be funded in as quick as 1 business day.
PayPal’s Actions Convey Continued Expansion of Lending Business
July 27, 2018PayPal announced its Q2 2018 earnings yesterday. Notably, total payment volume grew 27%, which is 1% higher than Q2 of last year. And the popular payment app Venmo, which is owned by PayPal, grew 78%, only slightly less than its growth of 80% from the last quarter. As expected by Wall Street analysts, revenue growth lagged total volume growth as Venmo is still largely unmonetized.
PayPal demonstrated continued commitment to its online lending division, PayPal Working Capital, when last month it made a significant investment in LendUp, a startup that offers loans to subprime consumers. This follows PayPal’s September 2017 acquisition of Swift Financial, for $183 million.
In yesterday’s Q2 earnings conference call, PayPal CEO Dan Schulman spoke about the company’s consumer lending division, PayPal Credit. He said that the company has strengthened its partnership with eBay by signing an agreement to extend its long-standing consumer financing offer to eBay’s marketplace.
“With this agreement,” Schulman said on the conference call, “eBay will continue to accept and promote PayPal Credit through 2025.”
As PayPal continues to grow both PayPal Credit and PayPal Working Capital, it does have the advantage of strong name recognition. After all, it started back in 1998 as one of the first major websites on the internet. To emphasize this, during the conference call, Schulman cited a recent ComScore study that reported that 52% of mobile consumers said they made more online purchases because PayPal was offered. And one-third of all PayPal mobile customers surveyed said they will abandon a purchase if PayPal is not offered as a checkout option.
PayPal Completes Sale of Consumer Credit Receivables to Synchrony
July 6, 2018Yesterday, PayPal (NASDAQ: PYPL) announced the closing of its sale of $7.6 billion of consumer credit receivables to Synchrony (NYSE:SYF) for roughly $6.8 billion. At the end of 2017, PayPay announced that it had agreed to sell consumer credit receivables to Synchrony Financial as a part of an expanded relationship between the two companies.
The completion of yesterday’s transaction means that PayPal and Synchrony have extended their existing co-brand consumer credit card program agreement, and Synchrony is now the exclusive issuer of the PayPal Credit online consumer financing program in the U.S., through 2028.
“We’re pleased that we’ve completed the sale of our U.S. consumer credit receivables portfolio,” said President and CEO of PayPal Dan Schulman. “Our agreement with Synchrony accomplishes every goal we set out for our asset light strategy. We look forward to working with Synchrony to double down on our innovative consumer credit experiences for our customers and profitably grow the portfolio over time.”
The relationship between PayPal and Synchrony is not at all new. The two companies have partnered to offer PayPal-branded consumer credit cards to consumers since 2004. Synchrony will update the financial impact of this transaction in its second quarter 2018 earnings call.
eBay to Part Ways With PayPal, Bring Payments in House
February 2, 2018
We all must leave our parents one day and branch out on our own.
However, this is probably not what PayPal Holdings Inc. had in mind.
The company is surrendering its duties as the primary payment option for its former parent, eBay Inc.
On Wednesday, eBay announced that Adyen, a Dutch company, will take over as the main payments processor when the current deal with PayPal expires in mid-2020. The change will allow the platform to host more of the transaction process in house.
eBay was motivated to make a change by the desire to intermediate the transactions taking place on its site and to allow buyers and sellers to complete their business within one website (eBay).
“As a leading global commerce company, eBay believes that payments intermediation is strategically important to improve the buyer and seller experience on its platform and will enable the company to further innovate on behalf of its customers,” the company said in its statement. “In a rapidly changing and competitive e-commerce landscape, shoppers expect to be able to both shop and checkout on the site on which they transact. As eBay intermediates payments, shoppers will be able to complete their purchases within eBay.”
However, this will not be a total break between the two companies that were once attached at the hip. PayPal will remain an option for eBay users until the summer of 2023.
PayPal’s stock took a nosedive following the news. As of 9 a.m. on Friday in the company’s HQ of Palo Alto, CA. the stock had slid from $85.32 on Wednesday morning, down to $77.25 with brief rebounds along the way.
While the move may not have done any favors for PayPal’s stock, eBay is optimistic that it will be a boon for merchants that use the platform to sell their wares.
According to the release, most sellers can expect their costs of payments processing to be reduced after completing the transition. They should also enjoy a “simplified pricing structure and more predictable access to their funds.”
Update: PayPal Acquired Swift Capital for $183M
October 30, 2017According to a filing with the SEC, PayPal acquired Swift Capital for $183 million.
We completed the acquisition of Swift Financial Corporation (“Swift Financial”) in September 2017 by acquiring all of the outstanding shares for a total purchase price of approximately $183 million. We acquired Swift Financial to enable us to enhance our underwriting capabilities and strengthen our business financing offerings, helping us to deepen relationships with our existing merchants and expand services to new merchants. The allocation of purchase consideration resulted in approximately $44 million of technology and customer-related intangible assets with an estimated useful life of 1 to 3 years, $173 million of merchant receivables, net liabilities of approximately $139 million and initial goodwill of approximately $105 million, which is attributable to the workforce of Swift Financial and the synergies expected to arise from the acquisition. We do not expect goodwill to be deductible for income tax purposes. The gross contractual merchant receivables acquired are approximately $213 million. Management estimates that the cash collected will approximate the contractual amounts of merchant receivables. The allocation of the purchase price for this acquisition has been prepared on a preliminary basis and changes to the allocation to certain assets, liabilities and tax estimates may occur as additional information becomes available.
Source: http://files.shareholder.com/downloads/AMDA-4BS3R8/5480917220x0xS1633917-17-171/1633917/filing.pdf
PayPal’s Global Head of Product Comm Joins Lending Club
September 14, 2017Anuj Nayar, PayPal’s global head of product communications, has moved on to Lending Club as VP and head of communications, according to published reports. Nayar was also previously Head of Mac Public Relations at Apple from 2003 to 2008.
At PayPal, Nayar was the primary spokesperson on a range of proactive and reactive issues, according to his LinkedIn profile.
Lending Club has struggled in the PR department since May 2016 when the company’s founder resigned.
PayPal Scoops Up Swift Financial
August 10, 2017
Online lending M&A is under way. PayPal is bolstering its merchant lending capabilities with the addition of Swift Financial. While the deal was kept under wraps, some industry participants heard some buzz about a possible combination.
PayPal has been investing in its lending arm of late, evidenced by the addition of former Amazon executive Mark Britto as senior vice president and general manager of global credit in July.
Noah Grayson, South End Capital managing director and founder, weighed in on the deal.
“A merger of two industry leaders like this is not surprising. As the economy continues to improve and small business owners have access to more financing options, alternative business lenders are going to continue to consolidate to stave off competition, retain deal flow and secure profitability,” said Grayson.
Dave Girouard, founder and CEO at Upstart, a consumer lending platform that uses machine learning, reacted to the deal:
“I expect to see more consolidation in online lending across both consumer and small business in the next year. Platforms with either giant balance sheets or proprietary technology will likely stick around, but others will struggle to compete,” Girouard told AltFinanceDaily.
Alternative lender LendUp was a recent recipient of a PayPal investment. Sasha Orloff, LendUp’s CEO, had this to say about the deal:
“I’m not surprised to see an acquisition in the fintech credit space and expect this will kick off a wave of acquisitions. PayPal is a force to be reckoned with and we have seen them lead the industry again and again. Whether it is the partner model like with Synchrony, the acquisition model like Swift, Braintree/Venmo, Xoom, or the investment model like LendUp, they are proving again and again why they are leading innovation in financial services decade after decade,” said Orloff.
Meanwhile don’t expect to see a PayPal/LendUp pairing anytime soon.
“For our part, we’re going after a very different market and we’re focused on driving consumer financial inclusion — and we’re very focused on remaining an independent company and helping companies like PayPal and banks offer better products for millennials and the emerging middle class,” Orloff added.
PayPal was already working with Swift on a white-label basis for one of its products, PayPal Business Loan, which is a term loan with structured repayments.
“Swift Financial offers complementary business financing solutions and advanced underwriting capabilities that accelerate our ability to acquire new merchant partners with business financing solutions and to deepen our relationships with existing merchants and channel distribution partners,” said Darrell Esch, VP and Commercial officer, Global Credit, PayPal, pointing to Swift’s advanced underwriting and product capabilities and seasoned management team.
Swift was launched just over a decade ago and has extended loans to 20,000-plus merchants.
