Why is PayPal struggling
PayPal is struggling because growth in its high-margin branded checkout has slowed while newer mobile wallets and payment platforms compete for the same customers.
Analysts and industry commentators point to several connected problems rather than a single cause.
- Slowing branded checkout: The familiar PayPal button is the company's main profit driver, and its growth fell to about 1%, below what Wall Street expected.
- Competition: Apple Pay, Google Pay and Stripe offer mobile and online payment experiences that many users find faster and simpler.
- Shift to lower-margin revenue: More growth now comes from Braintree, PayPal's unbranded payment processing business, which adds revenue but earns much thinner margins than branded checkout.
- Leadership turnover: Repeated changes in senior leadership, including a CEO replacement, have been linked to a sense of instability and slow progress in modernising older technology.
- Collapsed buyout hopes: Expectations of a takeover by a private group that included Stripe fell apart, leaving the company under more pressure to improve as a standalone business.
The underlying business has not stopped growing overall. Commentary on the company describes the issue less as a lack of growth and more as a positioning problem, where the revenue that is growing is less profitable than the checkout product that built the brand. Any PayPal overview of recent results tends to separate these two parts of the business for that reason.
The company itself has acknowledged falling behind technologically, and its turnaround depends on reviving branded checkout while defending share against wallets built into phones.