In the last quarter of 2020, PayPal (PayPal shares - ticker PYPL) registered 16 million new active accounts and managed $ 277 billion in total payment volume. Since PayPal launched the new cryptocurrency trading services on its platform late last year, its earnings have been on the rise.
Revenues beyond initial forecasts
Customers who bought cryptocurrencies via the platform logged into PayPal twice as much as they did before buying cryptocurrencies, the company said in its investor update.
PayPal's transaction revenue increased approximately 12% from the third quarter to $ 5,7 billion. The company also notes that it will recognize transaction revenues from purchases, sales and storage of the cryptocurrency product, but will not include crypto-related transactions in the total payment volume.
“The volume of cryptocurrency traded on our platform has largely exceeded our forecasts,” said PayPal CEO Dan Schulman of the company's fourth-quarter earnings call.
“We are excited to leverage this early success by allowing customers to use their crypto balance as a source of funding. [...] We hope to launch our first international market in the coming months. " PayPal has worked with regulators and central banks to shape the "next generation of the financial system," Schulman added.
The huge pool of PayPal users is essential for the success of the operation
PayPal's merchant network may be more valuable than the trading services the company offers, said James Friedman, senior fintech research analyst at Susquehanna Financial Group.
Cryptocurrency trading for other companies like Square hasn't been "that profitable," Friedman said. “Trading is interesting, but for us it's not that interesting as a payment tool. […] PayPal has an incredible volume of merchants. ”, He added.
Due to the difficulty of using bitcoin as a regular means of payment, Susquehanna, who is a market maker in PayPal stocks, has explored the issue in polls. In December 2020, Susquehanna surveyed more than 120 small and medium-sized business owners to gauge their interest in adopting bitcoin payments.
More than 70% of respondents said they would accept bitcoin for checkout if PayPal or Square enabled it, but about half of respondents said they believe there would be no impact on their business if they added the feature.
More than half of the respondents said that the risk of fraud would be the main reason why they would not accept bitcoin for goods and services (as opposed to bitcoin's volatility or tax issues).
Susquehanna also interviewed more than 100 American adults about attitudes towards cryptocurrencies, current use of cryptocurrencies, and their likelihood of using them in payment transactions. They found that nearly half of respondents would not purchase a cryptocurrency product or service, while 5,5% would do so 10 or more times a year.
