PayPal signed three new major partners to expand its payments services:
- PayPal partnered with Apple in July 2017 to allow Apple users to make payments from the App Store, iTunes Store, iBookstore and Apple Music in the US, UK, Canada, Mexico, Australia, Austria, France, Germany, Israel, Italy, the Netherlands and Spain.
- PayPal integrated with Samsung’s mobile payments service, Samsung Pay, in July 2017 to provide Samsung Pay users the option to make payments in-app, in-store and online through their PayPal account. The service will initially be available in the US.
- PayPal integrated with Google’s Android Pay in April 2017 to allow Android Pay users in the US to select their PayPal balance as a payment option for in-app, in-store and online purchases.
Partnerships are key for PayPal to become a comprehensive payments platform
PayPal has been actively expanding since it separated from eBay in 2015; partnerships are a key driver for its overall growth. PayPal’s number of active accounts increased from 184 million to 203 million during Q1 2016 to Q1 2017, which includes 16 million merchant accounts. The quarterly transaction value reached USD 99 billion in Q1 2017, a 22% increase from the previous year, with mobile transactions accounting for 32% of this value. Mobile is increasingly driving the engagement across PayPal’s platform. In addition to PayPal’s mobile app, it acquired P2P payments service Venmo through the USD 800 million acquisition of payments gateway Braintree in 2013. Venmo’s quarterly transaction value has increased to USD 6.8 billion in Q1 2017, a 112% increase compared to Q1 2016.
As a payment platform, focussing on developing payment technologies is not enough to stand out; companies must also consider the versatility of the payments service and the user experience. The diversity of partnerships is crucial for PayPal to build its own payments ecosystem and increase the value of its payments services. PayPal signed 11 major partnerships in 2016, including Visa, Alibaba, Mastercard, Facebook Messenger, Discover, Vodafone and City Bank. These partnerships cover card networks, e-commerce platforms, social media, telecom operators and financial institutions. Joining forces with Apple, Samsung and Google further developed PayPal’s capability among app store and device-based payments services.
Turning competition into partnership will bring benefits for both sides
Apple, Samsung and Google all launched device-based mobile payments services during 2014 to 2015, which allows their users to make in-store, in-app and online payments. This initially positioned the three companies as potential competitors for PayPal. Apple will also compete with PayPal’s Venmo in P2P payments with launch of iMessage P2P payments in the latest version of iOS. However, developing partnerships with Apple, Samsung and Google has brought benefits to both sides.
Apple is relatively exclusive for its mobile payments services, as highlighted when Australian banks failed to convince Apple to share NFC access on Apple devices. This explains why PayPal’s partnership with Apple is for the App Store, iTunes Store, iBookstore and Apple Music, rather than Apple Pay. However, the expansion into Apple’s digital content is a breakthrough for PayPal to enter into Apple’s ecosystem and strengthen its payments offerings. Meanwhile, Apple can leverage PayPal’s payments infrastructure and offer its users more flexibility to purchase its digital content. Apple has been expanding payment options for iTunes and App Store sales since 2015 when it launched its first mobile operator billing deals.
Samsung’s partnership with PayPal follows a similar path to the Google and PayPal collaboration in April 2017. Adding PayPal for Samsung Pay and Android Pay will increase user adoption and create a better user experience. PayPal is backed by broad financial networks, so the partnerships could also reduce Samsung’s and Google’s friction in developing partnerships with banks and accelerate their global expansion. As Android Pay is also available for Samsung devices, it was important for Samsung to match Google and partner with PayPal, thereby reducing the risk of losing market share to Android Pay.