Dive Brief:

• PayPal is leaning on three key strategies to jump-start the growth of its flagship branded business, including encouraging its merchant clients to upgrade their payments systems to enable a better consumer experience, the company’s chief financial and operating officer, Jamie Miller, said this week.
• The payments pioneer is also counting on the appeal of its buy now, pay later service to attract consumers to its array of PayPal payments options, Miller said Tuesday at the Wolfe FinTech Forum conference.
• In addition, PayPal expects increased use of its Venmo peer-to-peer payments tool and the related debit card will help draw consumers to use the company’s broader menu of services, she said.

Dive Insight:

San Jose, California-based PayPal has been seeking to recharge growth for its branded business ever since a burst of activity beginning in 2020 during the COVID-19 pandemic began to flag a couple years later. When consumers were stuck at home using their mobile devices, online transactions using PayPal’s pay button surged, but that activity has cooled as the disease ebbed.

To revive profitable growth, the company appointed Alex Chriss as CEO in 2023 to succeed Dan Schulman, and he installed a new management team, including Miller. Chriss is seeking to increase PayPal’s role as a connector between its merchant clients and its consumer customers, collectively including 434 million accounts.

The new leadership has pitched more services to the company’s merchant clients, such as a guest check-out option and tailored shopping features, to boost demand for the company’s services. Increasingly, PayPal’s button is available in-store as well as online.

Last month, the company reported fourth-quarter profits contracted versus the year-earlier period as its PayPal branded payments volume rose only slightly over the year-earlier period. That rise included an increase in the U.S., but a slight pullback outside the U.S., with “some softness in Europe,” Miller said during an earnings webcast with analysts explaining the report.

Persuading merchants to shift to more modern systems will be key for PayPal to improve the branded experience, Miller said. “One of the things we’re very focused on is really improving our merchant experience and our conversion uplift and our consumer experience with the app,” she said at the Wolfe investor conference. 

She also explained how the branded business should benefit from the company better integrating its BNPL offering with its other payment options. “We’ve taken a lot of steps in ‘24 to really reintegrate that back into the pay flow, get that front-and-center with our consumers, and have that be a core part of our offering,” she said. That should be significant in how the company moves the needle on branded check-out “over the next couple of years,” she added.

Finally, she also noted how Venmo plays into the plan to improve the branded business. “Pay-with-Venmo in particular is something that has been great for our merchants, particularly those who are mobile first,” she said. The company also expects the Venmo debit card and related rewards as well as new app features will drive penetration of the product, she said.

“Venmo is an asset we’ve had for a long time that…we’ve kind of let it run itself,” Miller said. “We have a lot of opportunity to monetize (it) and to really work with consumers differently.”

Nonetheless, Miller reiterated that the company expects payments volume growth for the branded business this year to be about the same as last year.

The challenge for PayPal is the slew of companies that have sprung up to offer digital payment options since it was founded nearly three decades ago. They include the big tech players’ payment schemes, such as Apple Pay and Google Pay. In addition, there are a host of other financial technology companies offering payment alternatives, such as BNPL services, including Klarna and Affirm.

The sale of PayPal’s unbranded services, offered on a white label basis to big merchant clients through its Braintree unit, have been growing at a faster rate than the branded business, but at lower margins, squeezing profits. To improve Braintree profitability, the company has been renegotiating contracts.

“We’ve got a really rich cross-section of big accounts we work with in Braintree, from mega merchants to thousands of large enterprises, and (the company) really set out to look at the contracts where we just really weren’t feeling like we were where we should be,” she said.