Positive Reviews: The Resilience and Transformation Potential of Traditional Payment Giants
As the pioneer in the era of online payment, although the decline of PayPal has attracted attention, its underlying capabilities accumulated in the industry and the diversity of its business structure still demonstrate remarkable resilience. This resilience stems from both the user and merchant resources accumulated over history and is reflected in the continuous growth of its technology service business. Moreover, it provides the possibility for transformation in the face of future challenges.
Firstly, PayPal’s dual – wheel business structure of “payment + technology” provides a foundation for risk resistance. As mentioned in the news, PayPal’s business is divided into payment services (such as PayPal and Venmo) and technology business (such as the Braintree payment gateway). Although the market share of its payment services has declined due to intensified competition, the GTV (Gross Transaction Volume) share of its technology business (Braintree) has increased from 33% in 2021 to 44% in 2025, becoming the core driving force for the growth of the overall transaction volume. This layout of “front – end payment + back – end technology” actually constructs a complete service chain covering both C – end users and B – end merchants: the front – end payment business directly reaches users, accumulating traffic and data; the back – end technology business binds the merchant ecosystem by providing payment solutions for merchants. This business synergy enables PayPal to maintain its basic revenue through technology output when its payment services are impacted, avoiding the risk of “single – point collapse”.
Secondly, PayPal’s long – term accumulation in compliance and user trust remains an implicit advantage in dealing with the competition from stablecoins. Although stablecoins impact the e – commerce scenario with their low fees and on – chain payment features, they are essentially encrypted assets and still have shortcomings in regulatory compliance, user awareness, and the ability to connect with fiat currencies. For example, US regulations stipulate that stablecoins cannot pay interest to users, and most consumers are still accustomed to fiat currency payments. In addition, although on – chain transactions of stablecoins are convenient, ordinary users still have doubts about the security of “cryptocurrencies”. As a licensed financial institution, PayPal’s payment services are strictly regulated, and users have a higher degree of trust in the security of their funds. At the same time, PayPal’s fiat currency payment system is deeply bound to the traditional banking system, and it has a natural “intermediate bridge” value in the exchange and settlement between fiat currencies and encrypted assets. If the payment scenario of stablecoins expands in the future, PayPal may completely become a key exchange entry between fiat currencies and stablecoins by virtue of its compliance ability and user trust, and may even participate in the compliant operation of stablecoins (such as the subsequent optimization of PYUSD).
Finally, PayPal’s user and merchant ecosystem is still irreplaceable. Although the number of active users has slightly decreased, its global user base of over 400 million and the merchant network covering more than 200 countries remain its core assets. For example, Venmo, as a mainstream social payment tool in the United States, has more than 80 million monthly active users. The combination of its social attributes and payment scenarios has built a unique user stickiness. And the merchants served by Braintree include leading platforms such as Uber and Airbnb, and these cooperation relationships are difficult to be replaced in the short term. This ecological stickiness provides PayPal with a “trial – and – error space” – even if the market share of its payment services declines, it can still explore new revenue growth points through cross – selling within the ecosystem (such as providing credit and marketing tools for merchants) or value – added services (such as data services).
Negative Reviews: Strategic Passivity and Innovation Lag under Internal and External Pressures
Although PayPal has the resilience accumulated over history, the current challenges it faces highlight the strategic passivity of traditional payment giants in the digital economy era. The “encirclement and hunting” of external competition and the “dimensionality reduction strike” of stablecoins essentially expose PayPal’s lag in responding to user needs, iterating business models, and deploying emerging technologies. The failure of its own stablecoin, PYUSD, further amplifies this passivity.
Firstly, the “homogeneous competition” in the payment track has diluted PayPal’s core advantages. As mentioned in the news, PayPal’s market share in the payment business has declined from 54.8% in 2020 to 40.29% in 2024, and its growth rate (4%) is lower than that of the US e – commerce industry (6% – 7%). Behind this trend is the inevitable result of the payment industry’s shift from “incremental competition” to “stock competition”: on the one hand, traffic giants such as Amazon, Apple, and Google expand their payment business based on their own ecosystems (e – commerce, hardware, search), and lock in users through the closed – loop of “scenario + payment” (such as Apple Pay penetrating offline through the NFC function of the iPhone); on the other hand, emerging payment service providers such as Stripe and Wise seize the market of small and medium – sized merchants with low fees (some transaction fees are 1 – 2 percentage points lower than PayPal’s) and technological flexibility (such as API plug – and – play). PayPal lacks the ecological barriers of traffic giants and fails to form a differentiated advantage in terms of fees or technological flexibility. It can only maintain its market share through the passive strategy of “lowering fees + increasing marketing”, which directly compresses its profit margin (the net profit in 2022 decreased by 40% year – on – year). This “homogeneous competition” is essentially a manifestation of PayPal’s insufficient response to changes in user needs – when users (especially the younger generation) value the “scenario integration” of payment (such as social payment and offline convenience) rather than simply the “payment function”, PayPal failed to adjust its product strategy in a timely manner (such as the social attributes of Venmo were not fully explored), and was finally preempted by competitors in users’ minds.
Secondly, the penetration of stablecoins into the e – commerce scenario is essentially a “dimensionality reduction strike” of the “asset – driven” model against the “transaction – driven” model. PayPal’s business model is centered on “transaction fees” (with a fee rate of 2.29% – 3.49%), and its revenue directly depends on the number of payment transactions and the transaction scale. While the business model of stablecoins (such as USDC) is “asset – driven” – it makes profits by investing the stablecoin assets deposited by users in low – risk assets such as US Treasury bonds, and the transaction link can have zero fees or even subsidies. This difference gives stablecoins a natural cost advantage in the e – commerce scenario: merchants can save 2.5% – 3% of transaction fees by using stablecoin payments, and consumers can get better prices due to the low fees. Both parties have the motivation to promote the popularization of stablecoin payments. More importantly, stablecoins have achieved “disintermediation” relying on blockchain technology – e – commerce platforms (such as Amazon and Shopify) can directly cooperate with stablecoin issuers (such as Circle and Coinbase), bypassing traditional payment institutions such as PayPal and cutting off the value of its “transaction channel”. If this “disintermediation” trend continues, PayPal’s “pipeline” role in e – commerce payment will be completely replaced, and its core scenario (accounting for more than 50% of e – commerce payments in North America and Europe) will face the risk of systematic loss.
Finally, the failure of its own stablecoin, PYUSD, exposes PayPal’s strategic misjudgment and implementation shortcomings in the encryption field. Although PayPal launched PYUSD as early as August 2023, trying to transform from a “payment channel” to a “coin – issuer”, its market share is still less than 0.5%, far behind USDC (with a market share of over 20%) and USDT (over 60%). This result is not accidental: on the one hand, the current core trading scenario of stablecoins is still concentrated in cryptocurrency exchanges (such as Bitcoin trading), and USDC has formed a closed – loop ecosystem of “exchange – stablecoin – encrypted asset” through its deep binding with leading exchanges such as Coinbase, while PYUSD lacks similar scenario support; on the other hand, the overlap between PayPal’s payment ecosystem (such as e – commerce and social payment) and the cryptocurrency scenario is low, and users have insufficient motivation to use PYUSD (users are more inclined to conduct cryptocurrency transactions on exchanges rather than on PayPal). More importantly, PayPal failed to seize the “compliance” difference of stablecoins – USDC is regarded as a “compliant stablecoin” due to Circle’s strict compliance (100% reserve and regular audits), while although PYUSD has PayPal’s compliance qualification, it failed to strengthen this label in the market, resulting in no significant difference from other stablecoins in users’ minds. This strategic misjudgment has made PYUSD not only fail to become PayPal’s “savior” but also become its “value watershed” – without the rise of PYUSD, PayPal will face the dual pressures of the loss of traditional payment share and the impact of stablecoins.
Advice for Entrepreneurs
PayPal’s dilemma provides multi – dimensional inspiration for entrepreneurs: in the rapidly changing digital economy era, enterprises need to simultaneously deal with the squeeze of “stock competition” and the subversion of “emerging technologies”. Only by centering on user needs, driving by model innovation, and building an ecological barrier can they stand firm in the wave. Combining the news event, the following suggestions are for reference:
Beware of the “homogeneous competition” trap and build differentiated user value: The decline of PayPal’s market share is mainly due to the high overlap of the user value of its payment services with that of competitors (such as Apple Pay and Stripe). Entrepreneurs need to avoid falling into the “function involution” and instead build differentiated advantages around the core needs of target users (such as scenario integration, cost – efficiency, and emotional connection). For example, if focusing on the payment of small and medium – sized merchants, they can strengthen “low fees + customized technical support”; if targeting C – end users, they can deepen the scenario integration of “payment + social” and “payment + local life” to improve user stickiness.
Actively embrace emerging technologies, but clarify the matching logic of “technology – scenario”: The impact of stablecoins on PayPal is essentially the efficient matching of new technologies (blockchain) and new scenarios (e – commerce payment). When entrepreneurs deploy emerging technologies (such as Web3 and AI payment), they need to first answer “what problems in what scenarios does the technology solve”. For example, if planning to introduce stablecoin payment, they need to evaluate the sensitivity of target users (merchants/consumers) to low fees, their acceptance of encrypted assets, and whether they have a “asset – driven” profit model (such as making profits through investing the deposited funds). If blindly following the trend, they may repeat the failure of PYUSD – advanced technology but unmatched scenarios, and finally find it difficult to implement.
Transform from a “transaction pipeline” to an “ecological platform” to enhance irreplaceability: PayPal’s “transaction – driven” model is easily replaceable, while the “asset – driven” model of stablecoins relies more on the ecosystem. Entrepreneurs need to think about how to extend from single “transaction services” to “ecological services”. For example, payment service providers can integrate the marketing, credit, and data needs of merchants and provide comprehensive solutions of “payment + SaaS + finance”; C – end payment tools can combine scenarios such as social and content to build a closed – loop ecosystem of “payment is social” and “payment is service”. Through ecological binding, enterprises can upgrade from a “replaceable pipeline” to an “irreplaceable platform”.
Attach importance to compliance ability and user trust to lay a foundation for long – term development: PayPal’s compliance qualification and user trust were once its advantages, but it failed to fully transform them into barriers in the competition of stablecoins. Entrepreneurs need to recognize that in the field of fintech, compliance is the “bottom line for survival”, and user trust is the “high line for competition”. Whether it is traditional payment or emerging encryption business, a strict compliance system (such as fund custody and anti – money laundering) needs to be established, and user trust needs to be strengthened through transparent operation (such as public reserve audits). Only in this way can they achieve long – term survival in the face of the dual challenges of stricter regulation and technological subversion.
Maintain strategic flexibility and achieve a dynamic balance between “conservation” and “innovation”: Part of PayPal’s dilemma stems from its excessive dependence on the “core scenario” (e – commerce payment). When this scenario is subverted by stablecoins, it lacks sufficient “second growth curves”. Entrepreneurs need to avoid “path dependence” and continuously explore new scenarios and new businesses (such as technology output and value – added services) while consolidating existing businesses. For example, payment enterprises can package their underlying technologies (such as risk control and clearing) into SaaS products and output them to small and medium – sized financial institutions; or expand new businesses such as precision marketing and credit evaluation based on user data to diversify the revenue structure.
In short, PayPal’s story is not only the “mid – life crisis” of a traditional giant but also an epitome of the “innovator’s dilemma” in the digital economy era. For entrepreneurs, the key is not to avoid being subverted, but to become the “subverter” rather than the “subverted” through continuous user insight, model innovation, and ecological construction.
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