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Paypal Holdings Inc. is a global financial technology-based organization of American origin that operates an online system of payment in majority of the countries that can support the transfers of online money. The company has become an effective alternative to the traditional methods of paper-based payments that include the money orders and cheques. The organization operates as a processor of payments for the online vendors, commercial users and auction sites for which the company charges a particular fee. The company was established in the year 1988 under the name of Confinity and thereby PayPal had gone public through IPO in the year 2002. PayPal became a subsidiary of a major organization like eBay in the year 2002 and the organization was mainly valued at around 1.5 billion Dollar
The vision statement of Paypal Holdings states that “We are a purpose-driven company whose beliefs are the foundation for how we conduct business every day.” The mission statement of Paypal Holdings states that “Our mission is to democratize financial services to ensure that everyone, regardless of background or economic standing, has access to affordable, convenient, and secure products and services to take control of their financial lives. We believe access to affordable and convenient financial services should be a right for all rather than a privilege for the few. To achieve this, we are aligned across the company around one central vision: to make the movement and management of money as simple, secure, and affordable as possible.”
PayPal has developed a two-sided model of the business as it gains revenues from the consumers and merchants. The revenues are generated from merchants based on fees that are charged for completion of the payment transactions and the various other services related to payments. PayPal earns money from the consumers based on the fees that are charged for the conversion of foreign currency, instant transfers that can be made from the Venmo or PayPal account to the bank accounts or debit cards of the customers. The strategy is mainly based on the ways by which the company aims at facilitating the sales and purchases of cryptocurrencies, fees, interest or the other revenues from various credit programs and the other miscellaneous fees. PayPal also gains revenues and earnings by offering the value-added services that include revenues earned through the partnerships, fees and interest from the merchants and the consumer credit-related products, subscription fees, referral fees, gateway services and the other services that are offered to consumers and merchants.
The corporate level strategies of PayPal are mainly based on the aspect of Total Payment Value or TPV that is a major metric considered by PayPal. TPV is mainly value of the payments, net of the payment reversals and the successfully completed payments that have been made on the platform of PayPal. The revenues of PayPal are divided into two different categories that include the transaction revenues and the revenues that are gained from the other value-added services. The net revenues are mainly earned by PayPal from the fees and interest being earned on the overall portfolio of the loans that are receivable and the interests earned on the assets underlying the customer balances.
|
PayPal Revenue streams (in $ Mn) |
2021 |
2020 |
2019 |
|
Transaction Revenues |
23,402 |
19,918 |
16,099 |
|
Revenues from other value-added services |
1,969 |
1,536 |
1,673 |
|
Total Revenues |
25,371 |
21,454 |
17,772 |
The major strengths that have been gained by PayPal are related to the global presence gained by the brand based on extensive reach and the overall strategic expansion that the company has performed over the years of its operations. The strategic partnerships formed by PayPal are also considered to be a major strength developed by the company in the financial sector. Other important strengths of the company include the innovative and user-friendly nature of organizational operations.
The cyber attacks faced by PayPal and the frauds have a negative influence in the reputation of the company. PayPal charges high fees for the services being provided by the firm and this is considered to be a major weakness that the company has faced. The over-dependence of PayPal on the internet is also a weakness of the company.
PayPal is provided with an opportunity of international expansion and the proper usage of technologies for operating within the dynamic field. PayPal can also incorporate the aspects of transferring cryptocurrency on the platform for ensuring that better services and products can be provided to the customers and merchants.
The competition that is being faced by PayPal in the financial industry is a major threat being faced by the company. The lack of political stability in the financial sector and the cyber attacks that the company can face in the future are huge threats faced by the company and the position that it can maintain in the industry.
Political factors – Paypal Holdings has its operations in various countries and the government policies and capacities are different based on which the company can aim at developing the strategies. The political unrest in different companies can affect the operations and revenues of the company.
Economic factors – Economic aspects can affect the operations and decisions made by Paypal Holdings and the countries that offer high rates of interest can attract the firm for making investments. Rising inflation rate is a major economic factor that can influence the operations of PayPal in the financial sector of the US and other countries as well.
Social factors – Social factors that are mainly based on the cultural aspects and norms can influence the types of products that can be offered by Paypal Holdings. The consumption behaviours of the customers and the merchants are social aspects that can influence the strategies of the company.
Technological factors – The technological advancements in the different countries have increased the importance of social media for marketing and promotional activities of Paypal Holdings. Technological infrastructure of various countries can influence the quality of services offered by the company.
Environmental factors – The growth in concern related to global changes in climate and increase in levels of pollution are considered to be major environmental aspects that influence the strategies of the company.
Legal factors – The laws related to anti-discrimination and human resources influence the strategies of Paypal Holdings. Employment laws are also an important aspect of the strategies developed by the company.
The services of PayPal are provided to customers belonging to various age groups and income levels.
The services of PayPal are provided to customers belonging to various age groups and income levels.
The social class, lifestyle, tech-savvy nature and interests of the customers have an influence on the customer base of PayPal in the financial sector.
The types of behaviours that are depicted by the customers are considered by PayPal for developing the advertisements and the messages that are being provided to the target customers.
The two-way business model and strategy of PayPal is considered to be a major strategy that has appealed to the market and has provided the company with a major competitive advantage.
The product strategy implemented by PayPal is based on the various products that are offered to the customers that include payment processors for the online vouchers, payment gateway for the auction sites and the various commercial enterprises, payment banks for the individual users and easy transfer of money through the cross-border transactions.
Revenue model of PayPal Holdings is based on the fees that are gained by the company from the customers and the merchants on different transactions made by them. The impressive levels of revenues of PayPal have helped in the survival of eBay.
PayPal can increase its activities on the social media platforms and the company has aimed at helping people so that customers are able to use PayPal effectively.
Price – The prices of the products and services being offered by the competitors of PayPal are similar to that of the company.
Research and development are done by competitors.
Weaknesses’ comparison with competitors
Lawsuits are not always faced by other companies.
Organization’s Competitive Advantage
Competitive advantage of PayPal Holdings is based on large portfolio of products.
The key success factors of PayPal are financial resources gained by the company and the customer base formed among the merchants and customers.
The issues that PayPal has faced as a part of its operations are related to the cyber-attacks and the frauds.
PayPal had gained overall revenues of around 25.3 billion Dollars in the year 2021.
The situation analysis of PayPal Holdings is mainly based on the external and internal environment of the company and the factors that can have an influence on the overall strategies and approach developed by the organization. The external environment of the company can be examined by using the PESTEL framework and the internal environment can be examined by using the SWOT framework. The structure of the industry and the economic aspects can have a huge influence on the companies that are a part of the financial sector. Financial sector faces major changes due issues that can occur within the industry. PayPal is a major financial company in the sector and the fast changes can influence the overall revenues and profit margins gained by the organization.
The industry of financial services mainly refers to the different institutions which facilitate transfer of the funds between spenders and savers. The examples of companies that are a part of the financial sector include insurance companies, banks, pension funds and the securities companies. The companies that are a part of financial services sector aim at offering the different financial services that include investment services, mortgage brokers, retirement planning and fund transfers. The major types of the financial institutions that are a part of the industry include depository institutions like saving institutions, credit unions and the commercial banks and the non-depository institutions including pension funds, brokerage firms, stock exchanges and the investment banks. Regulations play the most important role in efficient allocating of the financial resources that are used by the companies. The development and economic growth of the individuals and companies are promoted by the financial companies.
The major competitors of PayPal Holdings in the financial industry based on the services and products that are offered by the company include American Express Co., Visa Inc., Mastercard Inc. and Fiserv Inc. PayPal has been successful in developing various competitive advantages in comparison to the other companies that are a part of the industry. The competitive advantages that are gained by PayPal are mainly related to the digital wallets, the strong financial profile and the online payment platform offered to the merchants and customers. The company has been able to form its strong position within the industry of digital payments and it does not face the risks related to lack of financial resources for next some of the years.
The analysis can be concluded by stating that PayPal has been able to gain major levels of success in the financial sector based on its quality of services and products and the financial resources and revenues that the company has gained. Summarize the key findings of the case study and provide a final conclusion on the company's current position and future prospects.Identify the key factors that have contributed to PayPal's success and how these could be sustained in the future.
