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PayPal Holdings Inc. has been known for some time as a major alternative for checkout online, but now the company is making it plain it’s putting considerable resources behind checkouts where its services function entirely in the background.
So-called unbranded checkout, led by the company’s Braintree processing platform along with a relatively new service called PayPal Complete Payments (PCP), is expected to help drive e-commerce volume for PayPal at a time when consumers are turning increasingly to online buying.
“Unbranded is a strategic imperative for us,” Dan Schulman, PayPal’s chief executive, told equity analysts during an earnings call last month. The service “is growing faster than the market and we are taking share,” he added, though he did not cite numbers.
Trouble is, PayPal makes less money on unbranded checkout than it does when payments occur on its branded buttons. Wall Street reacted to the move by shaving more than $10 off PayPal’s share price. By mid-May, the stock was still trading in the low $60s.
Launched late in 2021, PCP is aimed at small businesses and enables them to accept cards and digital wallets as well as a range of Venmo and PayPal services. In April, the service added the ability to accept Apple Pay, a move PayPal had foreshadowed in its November earnings call.
Now Schulman, who said in February he would retire by year’s end, is counting on big results, and soon. “Unbranded services will become a clear market leader,” driving margin growth for PayPal, he said during the May earnings call. “We put a lot of investment in unbranded checkout and it’s taking off.”
So much so that PayPal has improved its outlook for e-commerce growth, which the company entered the year thinking would be flat. “It’s a much-improved outlook” now, Schulman added.
Perhaps conscious that Wall Street was watching, Schulman added that traditional branded checkout remains PayPal’s “highest priority.” But then he quickly looped back to the virtues of his topic du jour. “We want to drive unbranded,” he asserted, in case nobody had been paying attention. “It helps with our data collection, and no question it will be a source of margin expansion.”
Schulman reassured everyone listening that PayPal is stealing market share in the buy now, pay later market, though he did not cite figures. The company was early to market with a service supporting BNPL, a checkout option whose installment-payment feature gained appeal with consumers during the pandemic.
The PayPal app, meanwhile, is now being used by 55% of PayPal’s consumer base, Schulman added. The app was thoroughly redesigned in 2021 as a so-called super app, taking on features such as discounts and rewards through PayPal’s Honey service.
Schulman, 65, took over as CEO in 2015 in the wake of the payments company’s separation from former owner eBay Inc. Now, a search committee appointed by PayPal’s board is looking for his successor. An announcement should come by the end of the year, Schulman said, matching the timing of his departure.
