True Competitors for PayPal Holdings (PYPL)

Business Model Summary

What PayPal Does: Digital payments platform enabling online/mobile payments, peer-to-peer transfers, and merchant services through multiple products (PayPal checkout, Braintree, Venmo, Xoom).

Revenue Model:

• Transaction Revenue (91%): Fees charged on payment volume ($28.8B in 2024)
  • Branded checkout (~30% of TPV, ~65% of transaction gross profit) - 2.25% net take rate
  • Braintree unbranded processing (~35% of TPV, minimal profit) - 0.30% net take rate
  • Venmo monetization (debit card, Pay with Venmo, instant transfers)
• Other Value-Added Services (9%): Interest on loans/receivables, credit products ($3.0B in 2024)

Total Payment Volume: $1.68 trillion (2024), 434 million active accounts

Target Customer:

• Consumers (checkout, P2P via Venmo)
• Online merchants of all sizes (SMB through enterprise)
• E-commerce platforms (via Braintree)

Key Differentiators: Two-sided network (consumers + merchants), trusted brand, PayPal checkout button conversion, Venmo social P2P dominance

---

True Competitors (Ranked by Similarity)

Tier 1: Direct Competitors (>80% Business Overlap)

1. Block Inc. (XYZ, formerly Square) - 75% Overlap

• Business: Payments ecosystem serving merchants (Square) and consumers (Cash App)
• Revenue Model: Transaction fees on GPV ($241B in 2024), subscription services, Cash App monetization
• 2024 Revenue: $24.1 billion gross, $8.9B gross profit
• Why Similar: Dual-sided payments platform (merchant + consumer), transaction fee model, P2P payments (Cash App vs Venmo), debit card products
• Key Differences: Stronger physical POS presence (4M sellers), Cash App Bitcoin trading, no branded online checkout button, more SMB-focused
• Competitive Dynamic: Compete for omnichannel merchants; PayPal dominates online checkout, Block dominates physical POS; Cash App vs Venmo for P2P

2. Adyen (ADYEN.AS) - 70% Overlap

• Business: Unified global payments platform for enterprise merchants
• Revenue Model: Transaction fees on processed volume (€1.29T in 2024)
• 2024 Revenue: €2.0 billion net revenue, 50% EBITDA margin
• Why Similar: End-to-end payment processing, merchant services, transaction-based revenue
• Key Differences: Enterprise-only focus (no consumer products), no P2P, no branded checkout, higher take rate on fewer customers
• Competitive Dynamic: Direct competition with Braintree for large enterprise merchants; eBay famously switched from PayPal to Adyen in 2021

3. Stripe (Private) - 70% Overlap

• Business: Payment infrastructure for internet businesses
• Revenue Model: Transaction fees (~2.9% + $0.30 per transaction), API-first approach
• 2024 Volume: $1.4 trillion processed
• Why Similar: Online payment processing, developer tools, merchant services
• Key Differences: Private company, developer-first API focus, no consumer brand/P2P, stronger startup ecosystem
• Competitive Dynamic: Compete for online merchants; Stripe wins developer-led decisions, PayPal wins brand-trust decisions

Tier 2: Partial Competitors (50-80% Overlap)

4. Fiserv (FISV) - 55% Overlap

• Business: Payments infrastructure + bank technology (Clover POS, merchant acquiring, issuer processing)
• Revenue Model: Processing fees + software/services ($20.5B revenue 2024)
• Why Similar: Merchant acquiring, payment processing, POS solutions (Clover competes with Square)
• Key Differences: Heavy bank technology focus (issuer processing, core banking), no consumer products, more infrastructure play
• Competitive Dynamic: Compete for merchant acquiring; Fiserv sells to/through banks, PayPal sells direct

5. Global Payments (GPN) - 50% Overlap

• Business: Merchant acquiring + issuer processing technology
• Revenue Model: Processing fees on merchant transactions ($9.2B adj. revenue 2024)
• Why Similar: Merchant payment processing, transaction-based revenue
• Key Differences: More issuer-side business, no consumer products, sells through bank partnerships
• Competitive Dynamic: Compete for enterprise merchant processing; different go-to-market

6. Wise (WISE.L) - 45% Overlap

• Business: International money transfer + multi-currency accounts
• Revenue Model: Transparent FX fees on cross-border transfers
• Why Similar: Digital money movement, consumer and business products, cross-border payments
• Key Differences: Focused on international transfers only, transparent mid-market rate model, no domestic checkout/acquiring
• Competitive Dynamic: Compete for cross-border payments; Wise wins on transparency/price, PayPal wins on merchant integration

---

NOT True Competitors (Common Misclassifications)

❌ Visa (V) / Mastercard (MA) - Card Networks, NOT Payment Processors - 15% Overlap

Why Often Listed: All are “payments companies” and process trillions in volume

Why NOT Comparable:

• Visa/Mastercard: Card networks that connect issuers and acquirers; earn ~0.13% assessment fees on transaction value
• PayPal: Payment processor that handles the actual transaction; earns 0.86%-2.25% take rate
• Role in Transaction: Visa/MA are the “rails”; PayPal rides on those rails and competes with other processors
• Customer: Visa/MA sell to banks; PayPal sells to merchants and consumers

Revenue Model Difference:

Company	Take Rate	Business Model
Visa	~0.13%	Network fees from banks
PayPal	0.86-2.25%	Processing fees from merchants

Actual Relationship: PayPal USES Visa/Mastercard networks for card-funded transactions (partner, not competitor)

---

❌ Apple Pay / Google Pay - Wallet Interfaces, NOT Payment Processors - 20% Overlap

Why Often Listed: All are “digital wallets” used for checkout

Why NOT Comparable:

• Apple/Google Pay: Digital wallet interfaces that store cards and enable tap-to-pay; earn minimal revenue
• PayPal: Full payment processor that handles the transaction end-to-end
• Revenue Model: Apple Pay has no transaction fees (funded by bank agreements); PayPal charges merchants directly
• Infrastructure: Apple/Google rely on underlying card rails; PayPal has its own processing infrastructure

Actual Relationship: Apple Pay is a checkout method that can sit alongside PayPal at checkout (complementary in some ways, competitive for checkout button real estate in others)

---

❌ Robinhood (HOOD) - Trading App, NOT Payments - 10% Overlap

Why Often Listed: Both are “fintech” companies

Why NOT Comparable:

• Robinhood: Stock/crypto trading app; makes money on payment for order flow, interest income, premium subscriptions
• PayPal: Payment processing; makes money on transaction fees
• Customer Need: Robinhood = investing; PayPal = transacting
• Regulatory Framework: Different regulators (SEC vs. money transmission)

Overlap: Only the “fintech” label and some crypto exposure

---

❌ Affirm (AFRM) / Klarna - BNPL Specialists, NOT Full Payment Processors - 25% Overlap

Why Often Listed: Both are checkout options and PayPal has BNPL products

Why NOT Comparable:

• Affirm/Klarna: Buy Now Pay Later specialists; earn merchant fees + consumer interest on financing
• PayPal: Full payment platform where BNPL (Pay Later) is one of many products
• Revenue Mix: Affirm is 90%+ BNPL; PayPal BNPL is a small percentage of total business
• Scale Difference: PayPal $31.8B revenue vs Affirm $2.3B

Actual Relationship: Affirm/Klarna compete with PayPal Pay Later specifically, not PayPal overall

---

❌ JPMorgan Chase (JPM) / Bank of America (BAC) - Banks, NOT Payment Platforms - 15% Overlap

Why Often Listed: Banks offer payment services and own Zelle

Why NOT Comparable:

• Banks: Deposit-taking institutions that earn interest on lending; payment services are a feature, not the business
• PayPal: Payment-focused platform where transactions ARE the business
• Revenue Model: Banks earn net interest margin (3-4%); PayPal earns transaction fees
• Regulatory Framework: Banks have FDIC insurance, capital requirements; PayPal is money transmitter

Zelle Note: Banks own Zelle (P2P network processing $1T+ annually), which competes with Venmo. But Zelle is free to users and banks don’t monetize it directly - it’s a defensive moat against PayPal/Venmo, not a profit center.

---

Competitive Positioning Summary

PayPal’s Truest Peers for Valuation:

1. Block (XYZ) - Most similar dual-sided platform (merchants + consumers)
2. Adyen (ADYEN) - Enterprise payment processing, transaction fee model
3. Stripe (private) - Online merchant payment processing (limited public data)
4. Fiserv (FISV) - Merchant acquiring, POS solutions

Investment Implications

For Comparative Valuation:

• DO compare to: Block, Adyen (transaction-based payment processors with similar take rates)
• DON’T compare to: Visa/Mastercard (networks, not processors - different take rates and business models), banks (deposit/lending institutions)

For Margin Analysis:

• Compare PayPal’s 18.4% adjusted operating margin to:
  • Adyen: 50% EBITDA margin (but no consumer business)
  • Block: Still investing in growth, lower margins
• DON’T compare to Visa’s 67% margins (capital-light network model is fundamentally different)

For Growth Analysis:

• Compare TPV growth to Block GPV, Adyen processed volume
• Compare branded checkout growth to Square online presence, Stripe market share
• Compare Venmo to Cash App (similar P2P + monetization dynamics)
• DON’T compare to Visa/Mastercard volume (they process the underlying card transactions PayPal facilitates)

For Market Share Analysis:

• Relevant Market: Online checkout button share, merchant payment processing, P2P payments (Venmo vs Cash App vs Zelle)
• Irrelevant Market: Card network volume (Visa/MA), total payments industry (too broad)

For Competitive Threat Assessment:

• Real Threats:
  • Adyen/Stripe taking enterprise Braintree customers
  • Apple Pay reducing checkout button prominence
  • Cash App taking Venmo P2P share
  • Block/Fiserv in omnichannel
• Not Threats:
  • Visa/Mastercard (infrastructure partners)
  • Banks (different business model)
  • Robinhood (different use case)

---

Why Fintech Classifications Are Confusing

The confusion around PayPal’s competitors stems from these common mistakes:

Classification Error	Reality
“All payments companies compete”	Networks (V/MA), processors (PYPL), and acquirers (FISV) play different roles
“Digital wallets are interchangeable”	Apple Pay is an interface; PayPal is infrastructure
“Fintech = single category”	HOOD (trading), AFRM (lending), PYPL (payments) are fundamentally different
“High TPV = competitor”	Visa’s $13T volume is card network rails; PayPal’s $1.7T is processing on those rails

The key insight: PayPal’s true competitors are companies that charge merchants transaction fees for payment processing (Block, Adyen, Stripe, Fiserv) - NOT card networks, digital wallet interfaces, or companies that happen to be labeled “fintech.”

---

Sources:

• PayPal Revenue & Metrics - Stock Analysis
• PayPal Investor Relations
• PayPal Business Model - Four Week MBA
• Adyen Annual Report 2024
• Fiserv 2024 Results
• Block Square Statistics - CoinLaw
• PayPal Braintree Pricing Strategy - Payments Dive
• Visa/Mastercard Business Model - The Motley Fool
• PayPal Competitive Landscape Analysis
• Venmo Revenue Statistics - Business of Apps
• Global Payments 2024 Results