PayPal’s new plans focus on owning more of the ecommerce transaction

Honey is an ecommerce tool that sits in a user's browser that allows shoppers to browse for coupons that it can apply for discounts during checkout. The Honey acquisition brought 17 million monthly active users to PayPal. These users access Honey’s browser extension and mobile app to find savings and track prices on items they want to buy.

Integrating Honey into PayPal's apps means the payments company will be able to track a consumer's entire buying experience, beginning with the initial discovery phase, where a consumer indicates interest in a certain product. PayPal and Venmo could then target him with savings and offers, delivered by Honey. Lastly, a user could be guided through a checkout experience all in one place.

"Honey’s shopping tools, coupons and rewards will be integrated into our omni-checkout solutions assuring the best deals for our consumers, wherever they shop and we will also enable merchants of all sizes to access anonymous demand data, so that they can drive incremental sales and increased customer engagement across their multiple channels," said PayPal's CEO Dan Schulman during the earnings call yesterday.

The company also provided some insight on its plans for crypto, which it announced last week. Users will be able to buy, hold and sell cryptocurrencies like Bitcoin and Ethereum directly in their PayPal wallets. Crypto will be available to US users in the coming weeks with plans to expand these features to Venmo and international markets the first half of 2021. To power crypto, PayPal is using the Crypto Brokerage APIs from Paxos Trust Company.

In a pilot, PayPal's customer waiting list for the new crypto functionality was two to three times what the company expected, according to Schulman.

"We’re going to take up our $10,000 limit per day to $15,000 per day, based on the demand that we’re seeing and we’ll roll out to 100% in the U.S. in the next two weeks to three weeks," he said.

Beginning in 2021, PayPal customers will be able to use their cryptocurrency holdings as a funding source to pay at PayPal's 28 million merchants internationally. Customers will be able to convert crypto to fiat to spend with merchants. No additional integrations will be required for merchants because payments will occur with fiat.

PayPal experienced significant growth during the pandemic. PayPal reported it now has 361 million accounts, adding over 15 million net new active accounts in Q3, a 55% percent increase over this period last year. At $247 billion in total payment volume during the quarter, PayPal has seen nearly 40% growth in this aspect, despite nearly 40% declines in its travel and events verticals. That's the highest growth rate in total payment volume in PayPal's history.

But as much as PayPal has found growth in new accounts, it's finding it hard to engage users more. The average PayPal user makes 40.1 payment transactions. That's up just 1% over last year and likely a driver behind the firm's strategic move into rolling out more comprehensive digital wallet functionality.

PayPal has also been busy launching its installment payment features. In the U.S., the company introduced Pay in 4 functionality, where consumers pay no fees or interest, and payments are seamless with automatic re-payments. The installments appear in the customer's PayPal wallet so they can manage their payments in the PayPal app.

For merchants, products are included in their existing PayPal pricing, so they don't have to pay any additional fees to offers installments to their customers.

PayPal now offers Pay in 3 for U.K. customers.

"What we are seeing [in terms of use of BNPL], that’s well beyond our expectations. I think it's going to be one of our big growth drivers as we go into next year and into 2022. I’m quite high on the potential of what we’ll see with Buy Now Pay Later. And by the way, there’s a ton more we can do on that too and we’ve got a large roadmap around that," said Schulman.

Monetizating Venmo continues to be a priority for Schulman and PayPal. The company introduced a Venmo Credit Card this quarter as an additional revenue driver for the popular payment app. It's launching with a contactless chip and a personalized QR code in partnership with Synchrony and powered by Visa.

With new BNPL functionality and a credit card, Schulman is bullish on Venmo turning the corner when it comes to revenue. PayPal expects Venmo to approach $900 million in revenue in 2021 and reach profitability in 2022.

Much of the new digital wallet functionality will arrive in the second quarter and the second half of the year, with a goal of having the majority of the changes rolled out by the end of next year.