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During its third-quarter earnings call late Thursday, PayPal Holdings Inc. announced a multi-pronged omnichannel strategy with Apple Inc. to enhance the company’s offerings for PayPal and Venmo merchants, as well as consumers.
Topping the list was PayPal’s announcement that it plans to support Apple Tap to Pay on iPhones. The initiative will enable PayPal merchants in the United States to accept contactless debit or credit cards and mobile wallets, including Apple Pay, using an iPhone and the PayPal or Venmo iOS app. As a result, PayPal merchants can use their iPhone as a mobile point of sale terminal without the need for a dongle or other accessory device. Apple launched the technology in February.
“We believe that this along with our other in-store initiatives will continue to accelerate our opportunity to seamlessly process payments in the physical world for our merchants,” PayPal chief executive and president Dan Schulman told analysts, according to a Seeking Alpha transcript of the earnings call.
Schulman said that PayPal is also adding Apple Pay as a payment option to its unbranded checkout flows on its merchant platforms, including its PayPal Commerce Platform. PayPal is testing this initiative with several e-commerce platforms and merchants and anticipates a broader rollout in the coming months, Schulman added. Unbranded checkouts refer to online sites where PayPal is accepted without the inclusion of a PayPal checkout button.
Finally, the agreement will allow consumers in the U.S. to add their PayPal and Venmo network-branded credit and debit cards to their Apple wallet, starting in 2023. Consumers will be able to use those cards online and in-store wherever Apple Pay is accepted.
“We anticipate this to be available in the first half of 2023, expanding the opportunity for our consumers to transact in-store,” Schulman said, according to the transcript. “This is a significant step forward in our relationship with Apple and we are excited to work closely with them to bring these new capabilities to our mutual customers.”
While taking questions from equity analysts during the call, Schulman said PayPal’s initiatives with Apple will unlock several opportunities to better serve merchants and consumers. He cited PayPal’s merchant fee of 2.29% plus $0.09 as a competitive advantage and said adding Apple to PayPal’s unbranded flows will make the company more competitive, since PayPal can position its platform as a complete payment solution for small and mid-sized merchants. “It enables us to offer more choice to our merchants, which is something we’ve been focused on for years and years now,” Schulman said, according to the transcript.
Enabling PayPal customers to add their PayPal and Venmo credit and debit cards to their Apple Pay wallets will increase PayPal’s branded transactions at checkout, Schulman added. To illustrate his point, he said PayPal has a similar arrangement with Google Pay. In Germany, for example, when Google Pay users add their PayPal credentials, there is a 20% increase in their branded checkout transactions.
“They also have the ability to create temporary digital cards that can even allow us to bring our buy now, pay later from branded checkout online, to everywhere a consumer shops,” Schulman said, according to the transcript. “I think there’s a lot of really nice unlocks.”
In addition to announcing the initiatives with Apple, PayPal said it plans to have acceptance for its Venmo peer-to-peer payment service on Amazon.com fully ramped up for the peak holiday shopping season starting later this month.
Schulman also said buy now, pay later has become an integral part of PayPal’s checkout strategy. PayPal’s Pay in 4 product has made 150 million different loans since its launch about two years ago. The payment option is accepted by 2.2 million unique merchants, according to Schulman.
“So not only do we have a great value proposition, but we have a real competitive advantage in knowing our customers, 90% of the people that use Buy Now, Pay Later, we have history on,” Schulman said, according to the transcript. “We’re really trying to imagine Buy Now, Pay Later as being fully omni as a capability. And we think that will unlock quite a bit for us as we look forward.”
For the third quarter, PayPal posted net revenue of $6.8 billion, up from $6.1 billion in 2021’s third quarter. Total payment volume for the quarter totaled $337 billion versus $309 billion a year earlier.
