PayPal CEO Dan Shulman said that the company hopes to become the world’s next banking “super app”, integrating mobile payment, shopping, investment, savings, budgeting and cryptocurrency functions under one platform, similar to China’s Alipay. What does this mean for traditional banking organizations? One of the biggest winners during the COVID-19 pandemic is PayPal, as more and more consumers are making digital payments to avoid physical contact, including the use of plastic cards and cash. In a recent meeting with investors, PayPal stated that it expects high growth to continue, with 750 million users by 2025, almost twice the current user base. With the significant increase in the number of users, PayPal predicts that the annual revenue growth rate in the next five years will be 20%, and the payment volume will triple. Traditional financial institutions are more concerned about PayPal’s ambition to become a “super application” that can support payment, shopping, savings, investment, and cryptocurrency functions on a single mobile platform. The expansion of this service is expected to result in two-thirds of the growth from existing customers and one-third from new users.
Dan Schulman, CEO of PayPal, said that most consumers today have too many applications to manage their daily lives, and PayPal may be a platform that can integrate many different functions. “This is really a super app. You can experience a lot of digital life in one app, and then be able to manage all transactions in one place, track all transactions, and get personalized customized recommendations,” he told MarketWatch.
Threat of PayPal “Super App”
The announcement and expansion of PayPal’s service highlights the intensifying battle for consumer wallets among financial technology companies such as banks, Stripe, Square, and Affirm, as well as large technology companies such as Google, Amazon, and Apple. Each of these players wants to dominate the shopping and payment experience of consumers. “What the Super App wants to do is to turn all these independent applications into a connected ecosystem where you can simplify and control the data and information between these applications, shopping behaviors and payment behaviors,” Shulman said. “Then you have this common platform and common data, allowing machine learning and artificial intelligence to work and provide personalized recommendations for these consumers.” In other words, it all comes down to using consumer insights to drive recommendations and The final shopping, payment and overall financial activities. Consumers benefit from the ease of participation and the potential value of optimizing how money flows from one financial application to another. This is where budget tools, rewards, and alternative payment options appear.
“We are building our digital wallet into a super application beyond payment and financial services.”
— PayPal CEO Dan Schulman (Dan Schulman) Schulman stated that PayPal intends to cooperate with other organizations to provide many traditional financial services, such as high-yield savings accounts, direct deposits, check cashing and investment, but integration between these services Will be seamless. Although traditional financial institutions have been the foundation of these services in the past, consumer loyalty is declining. In fact, according to PYMNTS research, one-third of consumers who said “registered” when talking about super apps said they trust Google (45%), followed by Amazon (29%), Apple (27%) and PayPal (22%) to provide this experience. Therefore, although consumers are open to the simplicity of super apps, PayPal still has to compete with powerful large technology companies.
Why is it important:
Consumers want to manage their finances within a single mobile platform in a simplified way. Most traditional banks and credit unions face the challenge of making current digital services “simple”.
To increase attention and engagement, PayPal recently introduced cryptocurrency transactions, in-store payment options, and installment payments (buy now, pay later). Increasing engagement can help reduce churn and increase average revenue per customer. PayPal’s decision to open its network to Bitcoin in October last year helped the company attract new users and greatly increased the scale of transactions. PayPal found that half of all customers using cryptocurrency features log in to the app multiple times a day. This activity may cause a “halo effect” in other services provided by PayPal.
Venmo also plans to launch new services to increase engagement
In addition to the services announced by PayPal, Venmo, a subsidiary of PayPal, is also developing new services. It is worth noting that the expansion of this service is important because although Venmo represents nearly one-third of PayPal’s users (65 million consumers), it only accounts for 4% of PayPal’s revenue. Service monetization is the main focus of PayPal, and Venmo’s user base is younger and more affluent than typical American consumers.
According to the recent announcement, Venmo plans to introduce new features, including: the ability to buy, sell, and hold cryptocurrency in the Venmo app and use it as a source of funds.
- Full launch of Pay with Venmo.
- Subscription management and bill payment services.
- Company Profile (Provide services described by small businesses on the Venmo application.
- Continue to launch the newly launched Venmo credit card.
- Wish lists, price monitoring tools, promotions, coupons and reward products are integrated in the Venmo app.
According to the Venmo user behavior research commissioned by PayPal , current Venmo users are valued in the increasingly competitive payment market. The study found:
- Since the COVID-19 pandemic, 65% of Venmo customers have increased their online buying behavior, while 65% of customers have reduced their in-store purchases.
- Sixty percent of US Venmo customers surveyed said that if rewards are offered, they will be more likely to use Venmo as a payment method.
- 40% of Venmo customers said that if their favorite website or app offers Venmo, they will use Venmo more frequently.
- Venmo is the most popular tip payment method for Venmo customers after cash and cards when paying for services.
- 30% of Venmo customers said that if there is an easier way to recharge their account, they will use Venmo to pay more frequently.
- 89% of consumers prefer to use Venmo to pay because they trust the brand, its ease of use, and because it allows them to split transactions.
PayPal: The power that needs to be taken seriously
Although the growth of the PayPal platform before the COVID-19 pandemic was very significant, few companies have benefited more from the transition to digitalization than PayPal. Not only are they used by 80% of retailers, but consumers also prefer the PayPal and Venmo platforms. During the COVID-19 pandemic, PayPal has always been one of the most active financial technology companies, providing services such as PPP fund allocation and buy-first-pay (BNPL) financing. PayPal’s almost immediate response to the needs of small businesses and consumers has allowed it to take customers away from slower traditional banking institutions. For example, using a PayPal cash card, small businesses can receive, spend, and withdraw PPP funds within the PayPal platform without having to go through traditional bank accounts or offline interactions. PayPal also waives merchant fees and allows deferred payments to help merchants.
Why is it important:
PayPal’s ability to flexibly meet the needs of consumers and small businesses within its existing (and very familiar) platform sets them apart from traditional financial institutions.
The company introduced its own BNPL (Buy Now Pay Later) feature, allowing PayPal users to finance their purchases in six installments, competing with financial technology companies such as Klarna, Afterpay, and Splitit. Unlike alternatives, the PayPal option is built into the existing ecosystem instead of requiring a new application to download or log in. Finally, PayPal was one of the first payment companies to offer QR code payment options, allowing consumers to simply scan products and pay. This contactless payment option is integrated in the familiar PayPal application and Venmo credit card. As the user base of PayPal and Venmo continues to expand, and their contacts with these powerful brands continue to expand, the potential to become major consumer financial institutions cannot be ignored.
Posted by:CoinYuppie，Reprinted with attribution to:https://coinyuppie.com/paypals-ambition-the-next-super-application-of-the-banking-industry-to-create-the-us-alipay/
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