Here's how PayPal continues to smash expectations quarter after quarter (PYPL)
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PayPal smashed expectations in Q2 2017, marking another in a series of spectacular quarters for the firm. It posted $106 billion in total payment volume (TPV), an increase of 26% annually. At the same time, it added 6.5 million customers — the highest total in three years — to hit 210 million users. And the company is growing organically, with annual transactions per user increasing by 10%.
The news comes as PayPal has changed its approach on partnerships, forging relationships with a myriad of firms across the spectrum.
- In the past two years, the firm has signed 18 partnerships with firms across the spectrum — a marked discrepancy from PayPal’s previous strategy of trying to beat out peers rather than work with them, but also a contrast from the “walled garden” approach of parallel innovation that’s taken hold across the industry.
- These run the gamut. Most notably, PayPal has partnered with major card networks to add “choice” to its wallet, which makes it easier for a user to opt to fund their account with a credit or debit card rather than a bank account. But the firm has also forged mobile wallet partnerships to get access to in-store payments, issuer partnerships to incentivize card use and promote reward point spending, tech firms to enter popular apps, like Facebook Messenger, and international firms like Baidu to expand cross-border flexibility.
A collaboration-first approach was a calculated risk turned formidable growth strategy.
- PayPal has long been working to become an omnichannel presence in consumers’ financial lives. Forging partnerships that enable new use cases across the spectrum shift PayPal’s positioning from an online payments firm to a ubiquitous consumer payments entity, with in-app, in-browser, and in-store options funded with the instrument of a consumer’s choice, bill pay access, remittance and P2P offerings, and more. These new use cases should lead to natural gains in engagement, since customers will go to PayPal more often and for a wider array of functions.
- Despite some short-term hits, this could propel PayPal for quarters to come. So far, that’s what PayPal is experiencing — in its earnings call, PayPal noted that more products, services, and experiences lead to more engagement with clients, which in turn leads to higher lifetime value. That scale doesn’t come without costs — some of these partnerships are pricey, which is contributing to a slight decline in the firm’s take rate. But by working with competitors rather against them, PayPal is spurring new and increased usage of its offerings, which is worth the upfront cost.
BI Intelligence, Business Insider's premium research service, has compiled a detailed report on B2B payments that:
- Sizes the B2B payments market relative to other major US payment segments
- Explains how the B2B payments process works, and what makes it so complicated relative to consumer payments
- Discusses the pain points associated with analog B2B payments
- Analyzes the factors behind eroding barriers to industry digitization
- Evaluates what it will take to eventually build up an industry-wise digital payments standard
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