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PayPal Holdings Inc. reported encouraging growth early Tuesday but left some analysts questioning how long that expansion can continue as the company concentrates on its branded growth initiatives.
“Branded checkout is our number-one priority,” chief executive Alex Chriss told equity analysts on a call to discuss the company’s fourth-quarter earnings. “We’re feeling really good about the quality of our innovation. We now have a best-in-class [checkout] experience.” PayPal began stressing branded checkout last year shortly after Chriss’s arrival from Intuit Inc. to take over from retiring CEO Dan Schulman. The term refers to efforts to make the merchant’s brand dominant as customers pay online or in-app.
Last year, Chiss said, was a time of preparation, with larger results now expected. “In 2024, we were fixing the basics of branded checkout, and we’re now starting to see that scale.” Now, according to numbers PayPal reported Tuesday, one quarter of branded-checkout traffic is exposed to an “upgraded experience,” such as prompts to the user to consider taking out a PayPal debit card for faster checkout “next time.”
The company’s Venmo peer-to-peer payment service, another product PayPal has been working on since Chriss took over, is also showing improvement, he noted. The service, along with branded checkout, were the drivers of a 4% improvement in transaction revenue in the quarter, according to PayPal. “We’re growing active customers [for Venmo], and we’ll continue to grow innovation,” he said, adding that the latest innovation is scheduled send capability. Venmo accounted for $75.6 billion in transaction volume in the quarter, or 17% of PayPal’s total volume.
These initiatives may be top-of-mind at PayPal, but some analysts who follow the company express doubts concerning their strength as a strategy. “Our high-level view is that PayPal will struggle to accelerate branded transaction growth, transaction dollar growth, and EBIT [earnings before interest and taxes] margin as it faces robust wallet competition and struggles to monetize Venmo,” wrote William Blair analysts in a report early Tuesday.
For the 2024 fourth quarter, PayPal recorded $437.8 billion in total volume, up 7% year-over-year. Total company revenue came to $8.37 billion, up 4%, slower than the 7% pace set by the growth of revenue for the full year. This totaled $31.8 billion.
