PayPal needs a market place and to grow some ambition

Hello, here is an email that is not an investment idea but an attempt to wake a company up. It is a quick Sunday note about the inaction that is going on at PayPal PYPL 0.00%↑ and this company not executing on it’s potential. It is frustrating to see. I call all activists investors such as Elliott to press for changes in the company. I have few hopes of making a change but I am making my call.

PayPal is commonly known as a payment button company. It brings safety, hides your card details from the merchant, and a convenient claims and refunds system when there is a problem. And that is fine.

However PayPal’s advantage is not only safety. It’s the same advantage as Amazon.

It’s convenience, having all your details on file so you save time at checkout.

Depending on the customer website integration, you can pay in a few clicks for the well designed PayPal integrations, or you still need to re-enter many details and register, for the badly designed integrations.

The better the integration, the less cart abandonment, and the more sales.

So to summarize, PayPal’s advantage is that

-They have your name

-They have your card number

-They have your address(es).

Enter the PayPal app.

https://techcrunch.com/2021/09/21/paypal-launches-its-super-app-combining-payments-savings-bill-pay-crypto-shopping-and-more/

PayPal launched a “super app” in 2021. It was kind of underwhelming in terms of response, but a step in the right direction. Some PayPal account users have installed the app just based on their engagement with PayPal. It seems from earnings calls, that there is an active user base.

https://www.paypal.com/us/digital-wallet

Here is the homepage: very Payment and balance focused.

Here is the deals part of the app, which isn’t on the homepage. Being in Spain I cannot test it because this feature is not available here, but my understanding is that it’s a code or a link to another app or merchant website. Weak user experience.

What is needed?

1-Build a Marketplace

Here is Kaspi superap (Kazakhstan). Its much more engaging. Kaspi is a payment solution similar to PayPal. Kaspi started as a bank and was then primarily a lending and payment app. Now market place is a huge part of their profits. That’s the potential.

You start to see the problem. You open the Kaspi app and you want to spend. You open the PayPal app and you want to check your balance, and then probably close it.

PayPal has got your details, your payment method ready, and an app with some millions of active users and probably a 200 million plus user base. Here is an idea of the user base. 9 million reviews is something.

Google store

Apple store - probably 200m+ downloads

The only logical next step is to aggregate a marketplace straight in the app. And on the homepage. Going to different websites is ok, but it is still a pain point for most people.

I say that as a PayPal and Amazon user.

The PayPal homepage could have a mix of ”Payments overview” followed by some marketplace deals.

All of these deals should be completed in 2 clicks within the app. PayPal could automatically check the delivery of items, ensuring the merchant uses fast enough shipment methods. I think most customers are ok with 1-3 days delays on most items achieved by the main courriers in developed countries.

What would it bring to PayPal?

-Extra revenue in marketplace listing fees and extra sales in engagement. A new vertical to grow.

It would be a new business unit that would grow organically with low cost of acquisition.

2-Advertising and suggestions

PayPal knows parts of my spending patterns. It knows I bought a 3 years old girl halloween costume last year. It knows I bought a fix for my bike or some skis and some clothes last year.

It will know if I bought the same item each year for 7 years each fall.

PayPal knows more about its active customers than Meta. Likes are not purchase intentions. Previous repeat buys are very strong signals. What does it do with it? Nothing. Because it is unambitious.

So now that you have the marketplace:

-next year it can push for a 4 year old halloween costume in the app. it can be a message: “Hey last year you got this halloween costume, the same merchant has this selection for young girls ”. Maybe that is a bit complex, but it could just say “hey, this merchant has more halloween costumes.”

It could push ads in the marketplace as you scroll down, suggestions for you or paid advertising.

The merchant could pay for plain or targeted advertising based on past purchases (including with other merchants).

Together, these two segments could provide a nice portion of PayPal’s profits.

3-A history of inaction in mobile

PayPal has not been a strong innovator to say the least. They focused on core payments which is fine, but forgot innovation. Here is the staggering Venmo example.

Venmo was acquired by PayPal in 2013. It is very popular in the USA. Ten years later, they haven’t rolled it out to even the Canada or the UK. I am not mentioning France or Germany as they would have a shock with translating an app. This is incredible!

The same lethargy is affecting the PayPal app development. The recent implementation of PayPal savings is a step in the right direction but it is slow. But, since 2021, there is no news release about the app, no big update, and if there was any, everyone missed it, including me.

A small team in Kazakhstan is outperforming them by a mile. It’s not like the Kaspi team are dev geniuses, any tech company can make an app. But not PayPal'?

The departure of Dan Schulman is a good moment, the company needs a replacement with a leadership that is ambitious and takes action. The board and management has been operators, but not innovators. There is no sense of ambition and urgency.

Where is the ambition PayPal?

emergingvalue.substack.com

The author owns some stock of PayPal since before IPO.