PayPal, the online-payment company, began trading today on the Nasdaq following a split from eBay. And after just one day on the stock market, PayPal’s market capitalization had surpassed the market value of eBay, which acquired the payment service 13 years ago.
Nikhil Joseph, an analyst with the emerging technologies practice of the Mercator Advisory Group, says in the early days of online commerce, PayPal earned consumers’ trust as a secure online payments processor. But he says the company must find new opportunities for growth.
“Card transactions online have gotten a lot more secure,” Joseph says. “So there are a lot of questions around what really is the value proposition that PayPal’s offering.”
PayPal is looking to answer those questions by growing its share of the mobile-payment market, as consumers increasingly use their smartphones to pay for goods in brick-and-mortar stores.
“Offline retail is much bigger than online retail,” says James Wester, a global payments analyst at IDC.
“That’s where all the card issuers are,” he says. “Apple and Google are trying to get into it as well.”
Gil Luria, is an e-commerce analyst at Wedbush Securities. He says growth in mobile payments is expected to skyrocket over the next five years as shoppers become more comfortable with the technology. He predicts Android, Google and PayPal will be the three most dominant players.
And mobile payments are not just about payments at retail stores. They are also peer-to-peer transactions. Those are things like “splitting a check, giving money to your kid or to a friend,” says Luria. While those kinds of transactions might not generate much revenue, analysts say, they help complete the payment ecosystem and can potentially build a data profile of customers that could be valuable to marketers.
PayPal owns Venmo, one of the most popular person-to-person payment apps. In early July, it also announced that it was acquiring Xoom, a digital money transfer provider to foreign countries.
“They can now compete head to head with Western Union and MoneyGram,” says Luria.
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