Fintech Today - FTT+: What PayPal's Next Move Should Be

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Hi all, Julie here.

Another big tech company is changing its name: Square. The new name, Block, is symbolizing how it’s going to continue focusing on blockchain technology. I’m not here to argue whether or not focusing more on blockchain is a great move, what I’m here to argue is that Jack should be willing to look beyond Bitcoin. This is going to drastically limit Square’s growth, and all but guarantees that if another crypto becomes more dominant, it will be playing catch-up.

Even analysts are starting to worry about this. Here’s Jack on the latest earnings call when asked about plans to move beyond Bitcoin:

Harshita Rawat:

Good afternoon. Thanks for taking my question. Jack, I wonder follow-up in your prepared remarks regarding Bitcoin. Are you looking to expand into crypto beyond Bitcoin, buy and sell, for example, buy and sell other cryptocurrencies and also enabling your users to kind of engage in defined NSP assistance. Thank you.

Jack Dorsey:

We're not. Our focus is on helping Bitcoin become the native currency for the internet. And we want to, we have a number of initiatives towards that goal cash app is just one. We're going to be building a hardware wallet, they're exploring Bitcoin mining, a consumer device to, to mind the claim at home or in a business our solid businesses.

In fact we, we believe, this focus is important. We believe it's right. And a lot of it has to do with the, the resilience, the fundamentals, the principles that Bitcoin offers. And we also want to make sure that we're giving back to the community as much as possible in this is also reflected in our approaches for Bitcoin wallet, Bitcoin mining.

And our new business unit called TBD, which is focused on building a developer platform to enable more ideas around decentralized finance on the Bitcoin stack and all that stability that offers and, all the resilience that's had over the decade plus. So we're going to release more details on what TBD is steering with a white paper on November 19 and we're really excited about the direction and excited about our focus.”

That brings me to my argument: the best move PayPal could make right now would be diving into crypto and DeFi head first.

Let me preface this by saying I think PayPal is going to do pretty well regardless, same with Square. However, PayPal has frequently been behind others when it comes to innovation in recent years. Look at how Cash App came out of nowhere to overtake Venmo in many aspects. While Venmo is still almost entirely P2P, Cash App has boosts, stock trading, and really good marketing. This is PayPal’s chance to take back momentum and start being the more innovative one. It already lets users buy, sell and hold more than just Bitcoin, but there’s so much more that it should dive into.

It’s pretty safe to assume that PayPal is already thinking about this. I did a quick search on its job page, and it currently has more than 100 roles with “crypto” in the job description and/or title.

On top of that, here’s CEO Dan Schulman on the latest earnings call:

“Although it's still early, initial results show that the new [PayPal] app has driven a 25 times lift in consumers exploring our deals and offerings; a 15% increase in first-time users transacting with crypto, and it has also driven a 35% lift in our cash card enrollments, and the average revenue per account from digital wallet users is twice that of checkout only users. We expect to launch more features next year, including equity investing capabilities. It is quite exciting to see the initial positive reaction to our app, and we will continue to refine and expand its functionality to help consumers navigate an increasingly digital and connected lifestyle...In the third quarter, our rapid pace of innovation continued. We had an exciting cadence of product introductions, including our new digital wallet apps for both PayPal and Venmo, the launch of Crypto buy, hold, sell in the UK, our goods and services P2P experience in Venmo, and cash back to Crypto with the Venmo credit card. To support and advance our key initiatives, we continue to invest aggressively in technology and development, and sales and marketing, including increased spending on customer acquisition and engagement strategies.”

Take note of the difference between him and Jack. Bitcoin wasn’t even mentioned in PayPal’s earnings call. It was always “crypto.” There’s no reason that both of these companies shouldn’t be looking into things like NFTs, domain names, custodial services, and more. Another goldmine for both of them? Finding a way to lower gas fees or any crypto transaction fee for that matter, though this will likely come as more and more transacting is done via Polygon and other protocols.

And in case you missed it, PayPal loves talking about becoming a “super app.” In this day and age, you arguably can’t do that unless you cover several aspects of crypto, which is clearly going to play a large part in customer acquisition and retention moving forward. In addition to being able to trade tokens, one major concern for these players is security. It is no secret that over the past few years, PayPal has invested heavily in fraud protection. This added layer of security could position them to be successful as crypto adoption becomes even more widespread. The company also has loads of cash that it could use to buy up players in the crypto space that specialize in many of these products and services.

This all positions PayPal to be a market leader should it decide to fully embrace and move further into crypto, web3 and DeFi. Though Square/Block may also have secure services, the fintech and crypto ecosystems have become so diverse that by focusing purely on Bitcoin, Jack might risk alienating a whole group of potential consumers and transitively pave the way for PayPal to become the “super app” that we’re all waiting for.

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Julie VerHage-Greenberg is the co-founder of Fintech Today, where she focuses on editorial content and brand. Prior to joining, she was Bloomberg’s first fintech reporter, covering Robinhood from before it was a billion dollar company, breaking the news that Plaid was acquiring Quovo, and interviewing executives on Bloomberg TV and at several large conferences.