"The 'new wave' always pushes the 'old wave'." This phrase accurately reflects the current situation of the payment giant PayPal. Back in the day, PayPal emerged as a "disruptor," gathering innovative pioneers like Elon Musk and Peter Thiel, with ambitions to revolutionize traditional finance and usher in the era of online payments. However, times have changed, and the once-disruptor now faces the fate of being disrupted. Under the siege of numerous competitors like Block, Apple Pay, and Google Pay, PayPal is experiencing a loss of market share, declining transaction activity, and a drop in payment volumes. To make matters worse, with the deep penetration of stablecoins into the payment sector, the collaboration between Shopify and Coinbase to provide on-chain payment services directly threatens PayPal's core e-commerce payment territory. Faced with internal and external challenges, PayPal looks at the now-celebrated stablecoins, seeing reflections of its former self.
- Payment Giant PayPal: The "Old Wave" Under Siege
At first glance, some investors might think PayPal has been unfairly punished based on its performance and stock price. In terms of revenue, while PayPal's income growth is not rapid, it is relatively stable, with revenue increasing from $27.52 billion in 2022 to $31.8 billion in 2024, with growth rates of 8.4%, 8%, and 7% respectively. Such growth should not have led to a significant drop in stock price during a long-term bull market in U.S. stocks. However, compared to the peak in 2021, PayPal's current market value is only 1/5 of its peak, indicating a severe divergence between performance and stock price.
This divergence stems from PayPal's business structure and the increasingly fierce market competition. PayPal's business is mainly divided into payment services (such as PayPal, Venmo, etc.) and technology services (such as Braintree payment gateway products). The payment business, which directly connects with users, has higher profit margins and strategic value. However, PayPal's growth in gross transaction volume (GTV) increasingly relies on technology-oriented businesses like Braintree. UBS estimates that from 2021 to 2025, the GTV share of payment solutions represented by Braintree will increase from 33% to 44%.
At the same time, the more profitable and valuable payment business is losing market share due to intensified competition. According to UBS data, PayPal's online payment growth rate in 2024 is only 4%, lower than the U.S. e-commerce industry's growth rate of 6%-7%. From 2020 to 2023, PayPal's payment market share has dropped from 54.8% to 40.29%. The loss of market share has also led to a bottleneck in user growth for PayPal, with the number of active users in 2024 decreasing by 1 million compared to 2022, and after entering 2025, transaction frequency has also declined, with the number of transactions in the second quarter down 5% year-on-year.
In the face of fierce competition, PayPal can only lower its take rate (which has decreased by 0.14 percentage points in the past two years) while increasing investment (with marketing expenses in 2024 expected to grow by 10% year-on-year). The reduction in fees and increased investment have directly impacted profitability. In 2022, PayPal's net profit once fell by 40% year-on-year, and although it achieved a profit rebound through cost control, annual profits have stagnated around $4 billion. With giants like Amazon, Apple, and Google continuously expanding their payment businesses, along with low-fee competitors like Wise, Payoneer, and Stripe, PayPal's territory is likely to continue shrinking, and the lack of differentiated advantages makes its development outlook grim.
- The "Home Invasion" Threat of Stablecoins: E-commerce Territory in Crisis
Unlike the high penetration rate of electronic payments in domestic markets, North America has a lower penetration rate due to the early popularity of credit cards, with offline card payments remaining mainstream. Therefore, the competitive logic of the payment war in the U.S. is "whoever dominates online will dominate the world." PayPal's position as the industry leader is attributed not only to its first-mover advantage but also to its capture of online scenarios, especially in e-commerce payments. PayPal accounts for over 50% of e-commerce payments in North America and Europe, which is its core advantage.
However, times have changed, and what was once an advantage for PayPal in e-commerce has become the most vulnerable scenario with the emergence of stablecoins. Stablecoins, represented by USDC, are ambitiously expanding into the payment field, and e-commerce, characterized by scalability and high frequency, is the most suitable scenario for payments. E-commerce platforms are also eager to collaborate with stablecoins, as using stablecoins for payments can bypass the traditional financial transaction fees of 2.5%-3%, making merchants naturally willing to promote them.
Collaborations between e-commerce and stablecoins are emerging rapidly. Amazon has announced a partnership with Circle to fully accept USDC stablecoin payments. In the independent site scenario, Shopify is also collaborating with Coinbase to plan for USDC payments. In the stablecoin payment scenario for e-commerce, traditional payment tools like PayPal are facing a trend of being bypassed, which will also impact their transaction volumes and performance.
From a business competition perspective, PayPal has no advantage in the face of stablecoins. PayPal's business model is transaction-driven, relying on fees for the "movement" of funds, akin to earning a markup in traditional retail. Additionally, PayPal's payment business still relies on traditional finance, such as banks, which means it must charge fees ranging from 2.29% to 3.49% in the transaction process. In contrast, the core business model of stablecoins is "asset-driven," allowing them to avoid transaction fees and rely on the assets accumulated by users for monetization, similar to the "wool coming from the pig" in internet business. This means that once stablecoins become mainstream, their clear fee advantages will significantly erode PayPal's e-commerce payment share. However, U.S. regulations prohibit stablecoins from paying interest to users, and most consumers still prefer fiat currency for transactions, providing PayPal with a certain buffer period.
- PYUSD: A "Self-Rescue" Attempt That Struggles to Shine
Some investors believe that a truly powerful payment settlement system should be a platform that seamlessly connects fiat and cryptocurrencies, rather than a purely cryptocurrency settlement platform. Therefore, against the backdrop of the hype surrounding cryptocurrency exchanges, PayPal has clearly been overlooked by the market. While this view is supported by grand narratives, there are certain flaws in the logic when combined with actual business.
Even if PayPal becomes the preferred payment platform linking stablecoins and fiat currencies, it still cannot change its role as a "payment channel," and whether it can extend into new business scenarios remains to be seen; moreover, relying solely on this role is unlikely to change the current situation where "stablecoins directly cooperate with e-commerce platforms, consuming PayPal's payment share."
Therefore, compared to integrating stablecoin payment functions, PayPal's greater opportunity in the era of on-chain finance is actually its self-issued stablecoin, PYUSD. Once it transforms from a "payment channel" to a "coin issuer," its commercial imagination and value will significantly increase. However, the development of PYUSD has not met expectations. Although it was launched in August 2023, PYUSD still shows a significant gap compared to mainstream stablecoins like USDC and USDT, with a market share of less than 0.5%.
The reasons for PYUSD's underwhelming development are not hard to understand: the current payment scenarios for stablecoins are still in the exploratory stage, and in most countries with stable monetary sovereignty, the core trading scenario for stablecoins remains cryptocurrency trading. Specifically, before the emergence of stablecoins, the conversion between fiat and Bitcoin had to go through banks, which not only slowed the process but also introduced issues like currency value fluctuations and transaction risks. Stablecoins precisely address this pain point—they do not require banks and, like Bitcoin, rely on blockchain technology for rapid matching with Bitcoin; at the same time, stablecoins act as a "firewall," blocking the association of sensitive information for traders.
In the current context where stablecoin trading is mainly concentrated in the cryptocurrency market, USDC, which relies on cryptocurrency exchanges like Coinbase, is bound to maintain a dominant position for a long time. Even if stablecoin payments gradually become mainstream in the future, what chance does PYUSD have? Contrary to some expectations, PayPal's payment ecosystem cannot provide much support for PYUSD; instead, PYUSD may become a "value watershed" for PayPal. Before PYUSD becomes a mainstream stablecoin, PayPal is likely to be a "victim" under the impact of stablecoins.
Conclusion:
PayPal's predicament is a common challenge faced by traditional payment giants in the digital age. Under the siege of multiple competitors, stablecoins, with their low fees and high efficiency, are quietly eroding PayPal's core e-commerce payment market. Although PayPal is attempting to self-rescue by issuing PYUSD, its development still faces numerous challenges. The rise of stablecoins is not only a shock brought by technological innovation but also a fundamental change in business models and competitive logic. For PayPal, this may be its "darkest hour," as well as a critical juncture it must confront and seek breakthroughs. Whether it can successfully transform will determine its position in the future payment landscape.
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Original Article: “PayPal's Darkest Hour in North America: Are Stablecoins the Last Straw?”
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