The year 2020 was undeniably a big one for PayPal, in any number of ways. The FinTech giant ended the year with 377 million consumer accounts, including close to 30 million merchant accounts. It added roughly 73 million net new actives in the last 12 months, which means it starts 2021 with 25 percent more customers than it kicked off 2020 with. At PayPal’s investor day, Jonathan Auerbach, EVP and chief strategy, growth and data officer, said consumers are behaving somewhat differently than they have in the past.
“The global reach of our two-sided network is such that when the pandemic caused people to engage more in digital channels globally, for many, we were their best choice,” Auerbach noted. “So when we introduced more great products in 2020 than we ever have — products like buy now, pay later or cryptocurrencies or QR codes — they all achieved scale amazingly fast. These new cohorts are using PayPal more than the old cohorts did, which is a remarkable accomplishment. It’s not simply due to the pandemic. We’ve gotten much better as a company in generating and engaging high-quality net new activities.”
Auerbach further said that software releases last year were up 26 percent over 2019 with 25 percent fewer bugs, and that the focus of the year had been building risk and compliance and sales and marketing capabilities, and then ensuring alignment across all of those initiatives.
The Importance of Super Apps
So what to do with all of that scale? Build a “super app” for financial services.
First, a bit of background. Super apps, as described by Karen Webster in late 2019, are “the everyday apps that become the front door for how consumers interact with and purchase goods and services as they go about their everyday activities.”
“These everyday apps don’t have to do everything – but to be effective, they must eliminate the friction associated with jumping among the slew of apps with cards on file that consumers use today to get things done, or to fill the gaps in access that exist,” Wester wrote. “As its moniker implies, a ‘super app’ is supposed to make it super easy for consumers to have more seamless access to the activities that are part of their everyday journey. And enabling payments for those goods and services within that super app goes along for the ride.”
The appeal of building a true super app, a la WeChat Or Alipay, is that it provides the ability to monetize access to the consumers who are leveraging that ecosystem. The challenges, however, are myriad, as the field of players looking to build that “one app to rule them all” is widening — and includes some very big names. PayPal is openly in the hunt. CEO Dan Schulman stated at investor day that there are too many financial apps and too much friction for consumers forced to toggle between them. Hence, his hope is to build a “super app” to manage payments, shopping, savings, investing, budgeting, crypto and identity — all in one place.
“What a super app wants to do is turn all of those separate apps into a connected ecosystem where you can streamline and control data and information between those apps, between the act of shopping, the act of paying for that,” Schulman said. “And then you have this common platform and common data that allows machine learning and artificial intelligence to kick in and give personalized recommendations to those consumers.”
Schulman went on to explain that PayPal’s core pillars for that super app will be payments, shopping and financial services. To be a true super app, he said, PayPal needs to offer consumers a range of online and offline digital payment options that are easily connected across merchants. And that is about more than connecting to the standard rails to make card and ACH payments happen — it also spans robust built-in rewards, points redemption or the option to pay with crypto.
“We’re in the process of building super app functionality to allow our customers to both begin and end their commerce and financial services journeys in our digital wallet,” Auerbach said during his investor day presentation, going on to speak about PayPal’s enhanced payments hub, advanced bill pay capabilities, rewards and loyalty advances to its digital wallet. PayPal will work with partners on some of these experiences, Auerbach said, but they will all still fall under what he called “a seamless PayPal experience.”
But that seamless experience faces competition from many corners, according to reports, as Apple Pay and Google Pay have their own locked-in user bases on mobile devices, and Square has its Cash App. And, as Karen Webster said in a commentary in late 2020, consumers are already interested in super apps. According to PYMNTS data, the one-third of consumers who said “sign me up” when it comes to super apps said they’d trust Google (45 percent), followed by Amazon (29 percent), Apple (27 percent) and PayPal (22 percent) to deliver that experience.
The good news for PayPal is that it’s not sitting at the bottom of the list like Facebook — but the less good news is how commanding a lead Google currently has over just about everyone else. Google played it smart, Webster observed, though it’s still early in the game.
“In a digital-first world, commerce is the experience that drives differentiation, adoption and innovation, and payments is what closes the loop,” Schulman said. “A super app ecosystem builds that bridge and drives value for all stakeholders. Players with digital-first as their DNA have a leg up.