Analyst Downgrades PayPal, Cites Competition

As more companies jump into the eCommerce payments ring, PayPal is facing competitive pressures, a Wednesday (Nov. 17) MarketWatch report suggests.

Wealth management firm Bernstein’s analyst Harshita Rawat has lowered its grade from outperform to market perform, and Rawat reportedly worries of more aggression from rivals that are adopting similar services, including Amazon and Shopify.

According to Rawat, those two companies make up about 32% of all commerce in America, and PayPal is at risk of losing its formerly pristine status to the competition. Part of her reasoning is that a great deal of PayPal’s business comes from smaller companies, which now have Shopify as an option.

“Amazon currently doesn’t accept PayPal and just agreed to accept Venmo starting in 2022,” she wrote in a letter to investors. “Shopify has ambitions of creating its own payments business and has been pushing its merchants aggressively to convert to Shopify payments platform (and also towards the Shop Pay button).”

Rawat called Shopify an “unassailable competitor” for the small business demographic.

Growth in PayPal could also end up faltering, with market share gains having the potential to slow down — possibly “by a thousand cuts” due to new technologies like the ability to auto-fill credit card information on internet browsers. That, Rawat said, cuts into PayPal’s usual business mode of getting companies to enter in credit card information manually.

Apple Pay could also represent a challenge, along with the rise of buy now, pay later and similar payment innovations.

PYMNTS reported on the partnership PayPal has forged with Amazon to let U.S. shoppers use Venmo at checkout, set to begin in 2022.

Read more: PayPal: Venmo Coming to Amazon, Pay Later User Hit 9.5M

PayPal’s Q3 results also showed the continuing influence of eCommerce in companies’ top and bottom lines.

PayPal’s Amazon partnership has been touted by CEO Dan Schulman as a development that would allow the company to work with a wider breadth of marketplaces.

On a call, Schulman said Amazon was an “extremely significant player” and that eBay had been fading as a contributor to payments and sales. The Venmo option is also significant thanks to Amazon’s massive market share in the U.S.

Venmo volume has been up 36% in the last quarter to $60 billion, which was also driven by crypto activity.