Shifting technology, new alliances and skepticism among young consumers are creating risks — as well as opportunities — for PayPal, according to Bloomberg.
That’s one reason PayPal is being spun off from eBay, which will give the payments business more flexibility to innovate and find new partners. Although PayPal has more than 152 million active accounts, they are used almost entirely for online payments. “I don’t use the PayPal app on my phone,” said Davis Meiering, a 20-year-old student at the NYU Stern School of Business. “I only ever use it online.”
“If you’re below 30, PayPal’s not relevant,” said Piper Jaffray analyst Gene Munster. Meanwhile, PayPal has struggled to get a foothold with in-store payments, an arena where it now faces competition from Square and Apple’s new iPhone-based payment system Apple Pay. “With consumer awareness, Apple is out there overnight,” Munster added. “That’s a piece PayPal is desperately struggling with.”
As an independent company, PayPal will have more latitude to make alliances with retailers and banks, the way Apple and Google have done as they attempt to leverage their control of smartphone operating systems into strength in digital payments.
“PayPal’s ownership by eBay may have made other e-commerce merchants or technology companies reluctant to work closely with the unit, as evidenced by recent announcements by Apple and Twitter to partner with upstart payment rival Stripe,” wrote Praveen Menon and Paul Sweeney, analysts with Bloomberg Intelligence, in an investors note.
But PayPal still needs to acquire at least some Apple-style cool factor to get 20-something users interested. In June PayPal tried to get concertgoers at the Governors Ball music festival in New York — a three-day event where people flock to see shows from OutKast, the Strokes and Skrillex — to download its app to pay for food. But that effort was thwarted by weak network connections.
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