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PayPal Holdings Inc.’s big news in November was that U.S. users of its Venmo wallet will be able to pay with Venmo on Amazon.com Inc.’s massive marketplace and on the Amazon shopping app, starting in 2022.
The news comes as the latest development in a long effort PayPal has engaged in to bolster Venmo’s ability to earn fee revenue and move beyond its base of peer-to-peer payments. “This is obviously a very significant moment in monetizing Venmo,” said PayPal chief executive Dan Schulman while announcing the news during an earnings call to discuss PayPal’s third-quarter results.
PayPal announced the Venmo deal with Amazon even though an exact launch date hasn’t yet been fixed. “We’re still working through the launch time frame,” Schulman said, “We’re both [PayPal and Amazon] eager to get going. Think about the market share Amazon has in the United States. This [deal] quite appreciably increases the addressable market for Pay with Venmo.”
PayPal has concentrated over the past few years on finding ways for its P2P app to earn revenue. One of those initiatives, Pay with Venmo, allows users to pay merchants with funds in their account and PayPal to levy transaction fees. Venmo’s payment volume grew 36% in the quarter, to $60 billion, though PayPal does not break out volume for Pay with Venmo. Partly as a result of such efforts, Venmo will generate $900 million in 2021 revenue, Schulman said.
Amazon’s U.S. gross merchandise volume, both directly and through third-party sellers, totaled $92.4 billion in the third quarter, accounting for about 44% of the U.S. e-commerce market, according to estimates from Digital Commerce 360.
The Amazon deal represents the latest such marketplace agreement struck by PayPal since the expiration last year of the payments company’s legal agreement with its former owner, eBay Inc. PayPal separated from eBay in 2015 but agreed to process payments for the site for five years.
Separately, Schulman reported the thorough-going redesign of the PayPal app, launched this summer, is on its way to paying dividends for the company, though he didn’t announce numbers. “We’re focused on becoming an everyday app for consumers,” he told the analysts.
The so-called super app supports an array of payments, shopping, and financial features and represents the company’s first complete redesign of its app in seven years. It also enables cryptocurrency transactions, a feature Schulman called out by announcing it had led to a “15% lift in first-time users of crypto.”
In the increasingly critical buy now, pay later arena, PayPal’s entry, Pay in 4, has generated $5.4 billion in payment volume since its launch late in the summer of 2020, Schulman said. “We will expand in early 2022 to allow longer-term repayment plans,” he added.
For the quarter, PayPal recorded $310 billion in payment volume ($300 billion excluding eBay), down slightly from the second quarter but up 26% year-over-year. Active accounts reached 416 million, up 15%, including 33 million merchant accounts. Revenue was up 13%, to almost $6.2 billion.
The transaction take rate, however, slipped to 1.81% from 2.06% a year ago. PayPal attributes the decline in this number, which measures PayPal’s share of each transaction, to factors including lower eBay volumes and a larger share of payments at bigger merchants and marketplaces.
