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PayPal’s Solid Q3, Big Crypto Ambitions And Plans To Bring BNPL to Venmo

It was another quarter of record-breaking results for PayPal, which saw both record transactions and new customer enrollments in Q3. Total payment volume rose 36 percent to $247 billion, beating analyst estimates for $232 billion. PayPal is now reporting a run rate of approximately $1 trillion dollars in payment volume. Venmo also reported its best quarter ever in terms of payment volume — reporting a 61 percent year-on-year TPV increase to $44 billion. Additionally, PayPal reported processing a record 4 billion transactions during Q3.

Net new active accounts also set a new record, increasing by 32 percent year-on-year or 15.2 million net new actives in Q3 bringing PayPal’s total active user base to 361 million active accounts and on pace to add an additional 70 million in total by the end of 2020. Additionally, PayPal reported signing on 1.5 million new merchant accounts — doubling its pre-coronavirus quarterly average merchant sign-on rate, CEO Dan Schulman told investors on the post-earnings conference call.

“Our scale, two-sided network, trusted brand, strong relationships with the regulators around the world and our [artificial intelligence] AI and data modeling capabilities can all be leveraged to ensure our PayPal and Venmo apps are essential parts of our customers’ daily lives. We still have a lot to do to achieve that vision, but let me be clear. We are investing to create one of the most compelling and expensive digital wallets in the world. And you can see this beginning to play out in our strong Q3 results.”

It was those investments — particularly PayPal’s recent expansion into cryptocurrency and buy now, pay later (BNPL) financing that were of particular interest to analysts when the Q&A segment of the earnings call. Responding to questions on the rapid rollout of services in the second half of 2020, Shulman took the opportunity to expound on PayPal’s wider vision for a “comprehensive suite of interlinked functionality around financial services, payments, shopping and  identity management that will be in the central part of our customer’s lives.”

Part of their lives, he noted, no matter what channel they want to transact in — online, on mobile or instore — and no matter how they want to pay, including, most recently, cryptocurrency. And crypto, he hinted, in response to questions about the future at PayPal, is in its earliest phase of being unlocked on the PayPal platform. Opening crypto acceptance up for its 28 million merchants around the world is a big first step.

Over the next year Schulman noted, PayPal is looking to extend and expand its crypto project. Declining to be more specific, he noted the play is to expand crypto’s functionality “working hand in hand with regulators every step of the way.”

Schulman also touted the success of PayPal’s latest BNPL push in the U.S., France and the U.K., noting that they have already seen uptake among consumers that surpasses expectations — and that this will be an area where PayPal will look to expand, even beyond its platform.

“I think it’s going to be one of our big growth drivers as we go into next year and into 2022. And by the way, there’s a ton more we can do with this too. We have a large roadmap around this for Venmo as well.”

Most of PayPal’s reported figures in Q3 came out ahead of analysts’ forecasts. PayPal topped earnings came in at  $1.07 per share, ahead of the forecasted 94 cents. Revenue clocked in at $5.46 billion, up from $4.38 billion, while analysts had been modeling $5.42 billion. The company now forecasts $900 million in revenue for Venmo during 2021.

But Paypal also forecasts fourth-quarter adjusted earnings to grow 18 percent, well below the 41 percent growth rate posted in the third quarter. Total payments volume growth would be in the low-to-mid 30 percent range, PayPal said, also indicating that growth is leveling out.

Stock watchers, it seems, were chilled by PayPal’s lower-than-expected Q4 forecasts — shares dipped 5.5 percent in after-hours trading Monday immediately following the results’ release.

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