PayPal Faces Challenges with Branded Service Growth Amid Competitive Pressures

 

A PayPal sign is seen at its headquarters on January 30, 2024 in San Jose, California

San Jose, CA – PayPal faced difficulties in accelerating growth for its flagship branded service in late 2024, prompting the company to focus on technology upgrades and expanded payment options, including its Buy Now, Pay Later (BNPL) service, to drive expansion in 2025.

The company’s fourth-quarter earnings report revealed a 20% decline in net income to $1.12 billion, despite a 4% increase in revenue to $8.4 billion. Full-year net income dropped 2% to $4.15 billion, with revenue rising 7% to $31.8 billion. While total payments volume grew 7% in Q4 and 10% for the year, PayPal’s branded payments service saw sluggish growth, with gains in the U.S. offset by declines in international markets, particularly in Europe.

CEO Alex Chriss, who took the helm in 2023, acknowledged last year as a "transition period" focused on improving core operations. He reaffirmed PayPal’s commitment to enhancing its branded service, stating, “We’re just starting to put together a holistic strategy, and I’m feeling good about where we’re headed.”

To address growth concerns, PayPal has been encouraging merchants to upgrade to modern checkout technology, increasing adoption from 5% to 25% within a few months. Additionally, the company is rolling out new consumer payment options, including its BNPL service and an expanded push for PayPal-branded debit cards.

Despite these efforts, analysts remain cautious. Mizuho Securities pointed to "disappointing branded growth" and international weakness as factors dragging down the stock. Bernstein analysts also expressed concerns over increasing competition from Apple Pay, Google Pay, and BNPL providers such as Klarna and Affirm.

Chriss highlighted ongoing efforts to improve PayPal’s mobile experience, addressing gaps between mobile and desktop functionality. PayPal also plans to ramp up advertising investments to strengthen its position in the competitive digital payments landscape.

Meanwhile, PayPal is navigating challenges in its Braintree unbranded services division. The company has slowed growth in this segment to renegotiate pricing with large retail clients while leveraging its direct consumer connections as a strategic advantage.

As PayPal continues refining its offerings and expanding merchant adoption, it remains focused on stabilizing branded service growth and navigating an increasingly crowded payments market in 2025.