Last year, e-commerce sales in the US alone topped $1 trillion meaning the importance, and potentially balance books, of payments processors hit a new high.

And, like many other technology markets, it’s hot competition vying for space and the trust of both vendors and customers. 

Paypal is a name that has been synonymous with finance and payments for over a decade. Examining its business strategy shows that it’s no secret as to why. 

What is it that makes Paypal such a successful household name? Who are its immediate competitors and how do they stack up and what does PayPal’s immediate future look like? Let’s dive in.

There’ve been some pretty seismic changes at PayPal towers recently. Located in the San Jose region of California, the payments giant last month baid its eight-year veteran CEO Dan Schulman farewell in the top spot at least; he still remains on the board. 

Schulman’s tenure at PayPal was defined by an old school approach to aggressively pursue a gruntwork, low-value, high volume strategy while systematically pricing out or acquiring competition. He took the job in 2015, just after the company split up with eBay as the platform’s primary payment processor. 

Inline with his strategy, Schulman went on a buying spree, bringing iZettle and browser-rewards platform Honey into the PayPal fold to line up his volume approach. 

The reason for his departure this year is not entirely clear, though the company went through a tranche of staff lay-offs at the outset of 2023 to cut costs. Now enter 46-year old Alex Chriss, a 19-year veteran of Intuit, which saw him serve as executive vice president and general manager of the Small Business and Self-Employed Group, growing customers and revenues by over 20% year over year, according to PayPal.

He also oversaw the company’s $12bn acquisition of email marketing platform, Mailchimp, in 2021. 

Chriss carries big and small business experience with Intuit but it was really his especially in the latter in which PayPal saw its next leader. 

One of PayPal’s main subsidiaries is Braintree, a processor that lets businesses of any size take payments in a variety of forms for a relatively cheap fee, especially in comparison to major competitors Adyen and Stripe.

According to a recent Forbes report, Braintree’s revenue jumped to $8.4 billion in 2022 from $6.2 billion in 2021; this equates to roughly 30% of PayPal’s total net revenue. On top of that, it outpacing other parts of PayPal in growth terms and unbranded transactions, which are mostly driven by Braintree, jumped 40% in 2022. 

Braintree’s power for PayPal is that it serves as the worm on the hook to get business in and once through the doors of the PayPal empire, companies can then be upsold on its other suite of products and services. 

This is where, presumably, the company sees Chriss being of significant use given his experience as PayPal seeks to get into bed longterm with cryptocurrencies. 

This is where the battle between Stripe and Adyen becomes interesting as they are all currently down from the dizzying heights of pandemic sales and triple-digit percentage stock boons. 

Fundamentally, they cater to three similar but distinctive areas of the market. Where PayPal opts for middle-tier retailers, Adyen operates through the global powerhouses like McDonalds and Stripe’s DNA was built around the smaller market but has now gone more global.

The risk of cutting price out from the feet of competitors is known as a ‘race to the bottom’; where all companies slash prices to the detriment of everyone’s bottomline in bids to out-do each other. 

And it seems that one of the most competitive markets for the three to duke it out in is the processing volume from businesses like Shopify, Etsy or Ticketmaster; virtual marketplaces hosting millions of small businesses and where payments processors can get small cuts by the billions. 

To cater for this market, PayPal operates PayPal Complete Systems and Adyen and Stripe have similar in-house versions. As the power of small businesses online continues to rise across the world, owning the processing element for these sites will prove to be a potential gamechanger in determining the payments pecking order. 

PayPal’s expansion into other industries suggests they are still looking to grow rather than consolidate, too. In June,  it was announced that the company was divesting $43 billion worth of its European buy now, pay later (BNPL) loans to investment firm KKR. PayPal itself, meanwhile, reported a 70% increase in BNPL volumes year over year, to $6 billion.

There can be no doubt that Schulman led PayPal to the size and scale it commands today and, given what we know about the Braintree business, Chriss is likely to scale it according to his experience moving forward. 

It’s not hyperbolic to say that the online payments space is crowded like nothing we’ve seen before. Market leaders like PayPal are still betting big on crypto, which may come back to bite hard, meanwhile in the payments space companies like Adyen and Stripe are vying constantly to gain yards of market share in the seemingly endless universe of e-commerce.

Though PayPal is likely to remain on top for the foreseeable future, time will tell who is next to take and keep the top spot because given the economic climate, everyone is working frantically towards the next big breakthrough in a time when they are hard to come by.