(July 22, 2010) The nation’s sluggish recovery from a long and deep recession kept second-quarter transaction volume static for e-commerce processor PayPal Inc., according to statistics released this week by PayPal’s parent company, online auctioneer eBay Inc. While PayPal added nearly 3 million active accounts in the period to reach 87.2 million, the company saw virtually no increase in transactions, logging 337.3 million payments processed compared with 337 million in the first quarter. By contrast, that result was 30% higher than the 259.6 million transactions recorded in 2009’s second quarter.

Dollar volume followed a similar deceleration, with payments volume totaling $21.4 billion, barely changed from the $21.3 billion processed in the first quarter. Dollar volume was up 28%, however, over the year-ago period. Both dollars and transaction counts include eBay’s Bill Me Later business but not PayPal’s gateway traffic.

Still, the processor continued to make large gains with both large and small Web merchants off eBay. Its so-called merchant-services unit, which serves these merchants, saw its volume climb 42% to just over $13 billion. This business now represents 61% of PayPal’s total volume. In the U.S., PayPal is now accepted by 56 of the 100 largest Web merchants.

And the company’s Bill Me Later operation, which extends transactional credit to online shoppers, continued to get its credit woes under control. Net chargeoffs dropped to 8.56% from 9.49% in the first quarter and 11.08% in 2009’s second quarter. The 90-day delinquency rate slipped to 3.31% from 3.84% in the first three months of the year and 4.64% a year ago. Bill Me Later represents a steady 1% of PayPal’s overall volume. “Consumers like the benefits of online credit as an easy payment option,” said John Donahoe, president and chief executive of eBay, during a conference call on Wednesday to discuss the quarter’s results with analysts.

PayPal also saw its fledgling mobile-payments business continue an apparently torrid pace. Volume in this business in the first six months of the year was nearly double the volume recorded in all of last year, Donahoe said. Meanwhile, more than 2.5 million people have downloaded PayPal’s mobile apps, he said. This month, the company introduced its Mobile Express Checkout service to mimic the streamlined payment flow its Express Checkout product offers in e-commerce (Digital Transactions News, July 1). With the growing beachhead in mobile payments, Donahoe told analysts the company has “enormous potential to become the clear leader in online and mobile.”

Indeed, Donahoe spent some time during the call underscoring the significance of new markets and technologies to PayPal. “Innovation is becoming increasingly important, whether that’s digital goods, mobile payments, or credit with Bill Me Later,” he said. He also pointed out how developers working with PayPal’s platform are beginning to change the company’s original mission as a processor for online transactions. “We’re getting pulled offline by some merchants who see PayPal as a way to extend their private-label cards or the in-store experience,” he told analysts.

PayPal remains solidly profitable, posting a second-quarter transaction margin of 62.8%, with revenue as a percentage of transaction volume coming in at 3.6%, virtually flat with the first quarter.