PayPal Holdings Inc. (NASDAQ: PYPL) has given us payment convenience since the ’90s. I’ve had my PayPal account for about five years now, and it’s always been one of the easiest ways for me to safely send payments to individuals or small businesses.
I tend to be a little hesitant and skeptical about the levels of security when it comes to buying anything online or from small businesses, so PayPal has definitely eased that anxiety for me.
It also saves me time when I’m buying something online — I can just click “Pay with PayPal” instead of entering my bank card information every time.
And even today, PayPal continues to be a really convenient way to pay…
Soon Facebook users will be able to link their PayPal accounts to their Facebook and Facebook Messenger. They’ll be able to make purchases and receive notifications about their PayPal transactions through Facebook Messenger.
In addition to that, earlier in the year PayPal struck new deals with Visa Inc. and MasterCard to ensure they’re accepted in all mobile wallets.
These types of business decisions and collaborations continue to drive volume for PayPal. It wants to remain relevant as a payment service, and to do that it needs to be a part of as many different payment venues as possible.
And it’s paying off for PayPal… literally. The company has reported higher-than-expected revenue for the third quarter in 2016. It brought in $2.67 billion, 18.1% in growth from the previous year.
PayPal’s current strengths continue to be found in its robust revenue, its maintained reasonable debt levels, and its growth in earnings per share.
A really strong aspect to its business is the app Venmo. The app is a social payment service that has grown in popularity in the past year, especially with millennials who are looking to quickly split the bill, pay rent, or repay a friend.
In the first quarter of 2016, Venmo users sent $3.2 billion, up from $1.26 million in the prior year. By the third quarter of 2016, they processed $4.9 billion in payments — up 131% from 2015.
PayPal says Venmo is on track to deliver $20 billion this year.
A New Rival for PayPal
America’s biggest banks announced on October 24th that they’ll be rebranding their peer-to-peer (P2P) money exchange services to compete directly with Venmo.
Bank of America, JP Morgan Chase & Co, and Wells Fargo & Co first launched a money exchange service in 2011 called ClearXchange. At first it was only used to send payments between bank accounts at the same bank, but later on, it expanded its capability to instantly send money to accounts at different banks.
Unfortunately, ClearXchange didn’t have the support these big banks were hoping for. The platform was plagued with weak marketing. Users and other banks weren’t interested in adopting or being affiliated with the platform.
Last month, Citigroup joined the pack of banks that first launched ClearXchange to start rebranding the service.
The new service will be called Zelle, and it will allow users to send money from one bank account to another, whether it be from the same bank or a different bank.
An advantage this service has over other P2P payment services is that Zelle withdraws money from one account and deposits into another account instantly, instead of requesting a money transfer, which could take a while to go through.
A person will see the funds added to or removed from their accounts immediately.
“Paying a friend with Zelle on a mobile device is the way of the future,” U.S. Bancorp CEO Richard Davis said in a statement.
And he went on further to say, “Zelle is better for both the sender and recipient. There’s no waiting for a check to arrive or stopping for cash on your way home to pay the babysitter.”
Zelle is expected to launch in early 2017 and will be available to anyone in the U.S. with a checking or savings account. An estimated 20 banks are predicted to join the Zelle network in 2017.
According to Paul Finch, chief executive of the bank network operator Early Warning Services, “These banks consist of 76 million customers using mobile banking apps and about 65% of U.S. checking and savings accounts.”
The P2P money transfer market is growing and continues to rapidly grow. Money exchange services are becoming easier and more convenient, especially with apps like Venmo. An estimated 20% of all P2P payments are done through non-bank methods.
It’s easier to go out with friends and split a bill at a restaurant and not have to worry about finding an ATM to take out cash. Instead, you can make a few simple taps on your phone, and you’ve sent the money you owe. It cuts out the stress.
And for those reasons, it makes absolute sense for these big banks to begin taking bites from this prosperous pie.
Until next time,
Jennifer Clark
Pro Trader Today