Investment thesis on Paypal Holdings
Navigating a Strategic Turnaround in a Competitive Landscape
PayPal Holdings is a pioneer in the fintech industry. Established in 1998, PayPal has fundamentally changed the way people handle online transactions. One might argue in this field, they made the biggest advancements since the invention of the credit card.
Over time, the fintech industry grew more mature and increasingly more crowded. PayPal’s company performance also took a hit due to this increased competition and hit a recent low in 2023. In September 2023, PayPal brought on a new CEO, Alex Chriss, who has really turned PayPal into a turnaround story. We believe this tailwind continues to carry into 2025. Let’s examine the company as it stands at the beginning of 2025.
An overview of PayPal Holdings
Paypal’s core business has traditionally been providing a secure digital payment solution. Put simply, they help people or businesses send money to each other and then collect a transaction fee for the service. Simple right?
The transaction revenues comprise of:
Payment processing - fees charged to merchants or consumers for processing transactions
Cross-border transactions - fees charged for sending money to another country which can also include currency conversion.
Peer to peer transactions - fees charged when individuals send money to each other. While standard transfers are free, fees are charged for certain features like using a credit card or cryptocurrency for example. Venmo is the big player here that is a subsidiary of PayPal.
While customers are using the PayPal platform, there is also revenue generated from what PayPal calls value-added services. These include