Consumers feel flush, and ready to open their wallets – and especially their digital wallets. Earnings season is showing, in numbers and dollar signs, a continuance of the great digital shift that is giving a tailwind to online platforms and eCommerce, across borders.
As we’ve seen with the big banks, and with the payment networks like Visa and Mastercard, debit volumes were up double-digit percentages in the first quarter, and credit is showing green shoots, flat to slightly up.
The Trend is to Spend
PayPal is likely to put up results later this week that will show further evidence of consumer confidence – and especially, enthusiasm over a near-term digital, “alternative” payments roadmap that increasingly is paved with cryptocurrency. In terms of headline numbers, the Street is looking for earnings of $1.01 – and revenues, per consensus, are slated to grow by more than 27 percent year over year to $5.9 billion.
Visa and Mastercard’s data show the resilience of the U.S. consumer: Gross dollar volumes were up year on year, and Mastercard has stated that spending is at pre-pandemic levels.
For PayPal, expect the March period to be a riff, at least in part, on some familiar themes. As PYMNTS noted in the last earnings writeup, the total dollar volume was up 39 percent year on year, while the transaction count was up 27 percent. And in a nod to the connected network that has been growing by leaps and bound, cross-border transactions were up 31 percent on a currency-neutral basis. Expect management to detail the growing embrace of buy now, pay later (BNPL) options at the point of sale, which were used by three million customers at the end of last year.
Crypto on Near- and Long-Term Roadmap
Adoption of crypto is on an upswing, as PayPal said that customers who purchase crypto have been logging into PayPal at a rate twice their login frequency prior to purchasing crypto – which gives an onramp to more integrated efforts for using bitcoin and other digital offerings for transactions, in addition to buying and selling the coins themselves.
As reported last week, PayPal users can link their wallets to Coinbase to buy a range of cryptos. Linking the wallet to the exchange ostensibly gets crypto into the hands of the same consumers who, bit by bit, will spend at merchants down the line through the “add a payment option” (converting it into fiat, in the meantime, to buy goods and services). The PayPal/Coinbase joint effort seems to have at least some guardrails in place, as there are purchase limits of $25,000 per day with the PayPal account.
To get a sense of what PayPal is anticipating, CEO Dan Schulman said last month that the crypto service could reach $200 million in volume in mere months, due in part to the sheer size of PayPal’s installed base, which stands at 375 million customers and roughly 30 million merchants.
Depending on where you look, of course, crypto has its critics and doubters. Last week, Berkshire Hathaway Vice Chairman Charlie Munger termed bitcoin’s rise “disgusting,” and said that “I don’t welcome a currency that’s so useful to kidnappers and extortionists and so forth, nor do I like shuffling out a few extra billions and billions of dollars to somebody who just invented a new financial product out of thin air.” Meanwhile, the SEC continues to joust with Ripple over whether XRP is a currency or a security.
But in a nod to the long-term view, where cryptos become part of an ecosystem – and maybe part of the development of the super app – as Schulman told Karen Webster in an exclusive interview, the future is firmly rooted in digital-first connectivity.
“I think we’ve [obviously] come a long way from the button. We have a whole suite of services now that enable both consumers and merchants to … move into the digital era and thrive,” he told Webster. Visa and Mastercard’s sanguine comments on credit may auger well for PayPal Credit use at the point of sale. The payments networks have also been quick to point out the rapid – and inexorable – rise of contactless payments, which should also boost PayPal’s results.
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