Wednesday, July 24, 2024
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Is PayPal’s Dominance Coming to an End?

It is fair to say that PayPal changed the way we think about paying for things. From a niche startup called Confinity that emerged from the ashes of the dot-com bubble, it has become as recognisable as VISA or Mastercard, perhaps even more so to millennials. In 2020 alone, it processed $1 trillion in transactions. It is, of course, a Silicon Valley behemoth today, and it’s a financial institution in and of itself. But for many of us, it will forever be the technology that first allowed us to instantly ping money to a mate who we owed for a taxi fare or a round of drinks.

But while PayPal is now synonymous with online payments, many experts believe that its era of dominance is coming to a skidding halt. That’s not to say that PayPal will become unpopular – far from it. It is still the eWallet of choice for many online customers and retailers. In the UK, for example, using PayPal for online casinos is hugely popular due to its convenience, notably the speed of withdrawals, which tends to be much faster than debit cards and bank withdrawals. It is, of course, safe and secure too. It’s also the preferred option for a lot of merchants, which is part of the legacy from the time it was owned by eBay.

Rise of the native payment system

Anyone who has a smartphone will, of course, be aware of Apple Pay and Google Pay, both of which have been eating into PayPal’s market share. There are also the traditional rivals to PayPal, ranging from Skrill to Revolut to Shopify Payments. Some of these, like Skrill, are geared towards the individual customer, whereas others, like Shopify Pay and Square, are for merchants. Revolut, like PayPal, is something of an all-rounder. By and large, PayPal has been able to co-exist peacefully with these brands, remaining the market leader; it’s even integrated with some of them.

But there is, nevertheless, a more looming danger for PayPal. Namely, the desire for businesses to have their own payment systems within their ecosystems. For example, ever since Elon Musk took over Twitter, he has been vocal about his desire to create Twitter payments. Some have opined that this will incorporate cryptocurrency or at least some kind of digital token. The point, though, is that Twitter is one of many platforms that sees its future as a super app, and that means payments. Everyone from Amazon to Coinbase to Meta has explored or has plans to have their own form of native payment technology to dominate their ecosystem.

Crypto may challenge all payment systems

Cryptocurrency certainly presents a challenge to PayPal, although not everyone is convinced as to how impactful it will be. PayPal certainly hasn’t been asleep at the wheel in that respect, as it has offered users the chance to buy, sell, and send a handful of major cryptocurrencies for a few years now. However, there is a kind of juxtaposition between the positioning of the cryptocurrency sector and what PayPal offers. The goal of the cryptocurrency industry is decentralisation via peer-to-peer payments. It is intended to empower individuals to leave out the middleman. That means banks and financial institutions, such as PayPal.

The fear for PayPal would be these two elements combining: The push for platforms (imagine Spotify or YouTube, for example, having its own internal currency) to create native payment systems, and the wider roll-out of cryptocurrency as a viable peer-to-peer payment method. As mentioned, PayPal offers cryptocurrency services, but the fees are high, so it’s a world away from the fast and cheap global payments network envisaged by cryptocurrency enthusiasts.

But while PayPal’s dominance is declining, and it will arguably decline further, it does have a not-so-secret weapon – it has first mover advantage. That’s still going to count for a lot in the coming years. As such, PayPal is going to naturally continue to thrive because it is ‘already there’, available as a payment method everywhere, from your favourite online casino to Amazon to the way you pay your buddies for a round of drinks.

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