PayPal’s partnership strategy pays off with customer growth

PayPal Holdings chief executive officer Dan Schulman keeps converting one-time rivals into allies, and investors are embracing the results.

The transactions business announced a new deal with Bank of America Corp that will help expand its reach beyond websites and into physical stores.

It also reached a cross-border shopping agreement with search engine Baidu that will connect 700 million Chinese shoppers with 17 million PayPal merchants.

Those are the latest of 24 deals forged over the past 18 months between PayPal and a variety of technology, banking and credit card companies, including Apple, Visa and JPMorgan Chase & Co.

“PayPal is now seen as a partner instead of a disruptor, and that’s good for PayPal,” said Josh Olson, analyst at Edward Jones & Co.

Those alliances helped PayPal add a record 6.5 million accounts in the second quarter to reach 210 million customers. Users are also going to the service more frequently, with 32.3 transactions per account over the trailing 12 months, up 10% from a year earlier, the San Jose, California-based company said Wednesday in a statement.

Schulman said PayPal is on track to add 25 million new accounts this year thanks to deals that increase the number of places the payments service is accepted and raise the number of accounts that can be linked to its digital wallet.

Partners are encouraging their customers to create PayPal digital wallets because it helps them increase their own transactions, Schulman said in an interview.

“We drive a lot of growth back to our financial institution partners,” he said.

PayPal split from online marketplace EBay Inc. two years ago to speed its transition from a payment button on websites into a tool that lets people find and pay merchants and send money to friends through smartphone apps.

The shares rose as much as 3.9% in extended trading after the company reported second-quarter profit that beat analysts’ estimates and increased its earnings forecast for the year. The stock closed at $58.79 on Wednesday in New York, and has increased 56% the past year.

The Apple deal, which allows people to make purchases with PayPal in the App Store and on iTunes, gives the company a boost across mobile platforms.

Schulman also wants customers to use their smartphones to pay for goods in physical stores, which is why he’s been cutting deals with banks and credit card companies.

PayPal sees a stronger presence in physical stores – where most purchases still occur – as the best way to increase payments volume. It hopes to lure shoppers with time-saving features such as apps that let them order ahead and skip lines to encourage the transition from cash and credit cards to mobile wallets.

The company’s one-touch feature lets shoppers quickly pay with mobile devices using saved account information.

Venmo, PayPal’s person-to-person payments platform, handled transactions worth $8 billion in the second quarter, more than double the same period a year earlier. The company is pushing to expand the service, which is used most frequently by friends and family members to split expenses like dinner or rent.

Thousands of PayPal merchants can now accept payments through Venmo and PayPal wants to boost that number to millions by the end of the year, Schulman said.

Former PayPal parent EBay acquired Venmo in its $800 million purchase of Braintree Payment Solutions LLC in 2013.

“We’re encouraged by our early results on that,” Schulman said. “Merchants are eager to tap into the millennial Venmo shopper.”

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PayPal’s partnership strategy pays off with customer growth