PayPal online checkout growth slows as rivals Apple, Shopify, and Klarna gain ground

PayPal, which helped make online checkout common, is facing its toughest test in nearly 30 years. The company said its main checkout service is growing slowly. New leadership told investors that major fixes are needed. Rivals now offer faster, simpler ways to pay online and in shops.

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The pressure has shown up in the share price. PayPal’s stock fell almost 40 per cent over the past 12 months. The shares also dropped about 80 per cent in five years. The stock had surged during the pandemic as online shopping rose sharply.

PayPal branded checkout growth alarms investors

In its first-quarter earnings report, PayPal said branded checkout grew 2 per cent. PayPal described branded checkout as its strongest business by margin. The company pointed to weaker European activity and softer discretionary spending. Investors reacted badly, and the shares slid nearly 8 per cent.

Investor concern is centred on growth, not day-to-day profits. PayPal warned that 2026 profits would fall compared with the prior year. Still, the bigger question is how PayPal will keep customers. Competition has intensified across online payments and related services.

PayPal competition includes Apple Pay, Shopify and BNPL

PayPal’s position has been challenged by both new and established rivals. The list includes Apple, Shopify, and buy now, pay later firms like Affirm and Klarna. Peer-to-peer transfer options such as Cash App and Zelle have also gained users. Much of this shift has accelerated over the past five years.

Apple has emerged as a major threat through Apple Pay. Apple launched Apple Pay in 2014. The service lets users save digital debit and credit cards on devices. Apple also added tap-to-pay features on iPhones and Apple Watch for in-store payments.

Analysts said the PayPal button matters less when phones store card details. A user can pay with a fingerprint or facial scan. This convenience has pulled customers away from PayPal as a default option. It also reduced the value of PayPal’s website integrations.

UBS analysts estimated PayPal held about 9 per cent of US and global e-commerce in 2019. Apple Pay stood near 3 per cent then. Six years later, Apple moved ahead as the top checkout choice. Apple Pay’s share is expected to rise as it reaches non-iOS users.

Buy now, pay later services have expanded quickly, led by Klarna and Affirm. PayPal offers pay-in-four and longer monthly payment plans. However, PayPal trails major competitors in this area. Affirm was started by Max Levchin, one of PayPal’s founders.

"PayPal has had a lot of trouble evolving from being just a way to pay on your desktop computer,\" said Sanjay Sakhrani, an analyst who covers credit cards and payment methods at investment bank Keefe Bruyette & Woods.

PayPal leadership change and turnaround plan

PayPal’s business strain has triggered changes at the top. The board removed CEO Alex Chriss in February. Enrique Lores replaced Alex Chriss. Enrique Lores previously led HP Inc. and also served on PayPal’s board.

Enrique Lores set out a cost-cutting effort and a new structure. The plan reorganises PayPal into three divisions. It also calls for greater use of artificial intelligence. Enrique Lores told investors at May’s shareholder meeting that an updated turnaround plan would come in months.

Analysts have also raised questions about PayPal’s portfolio. Some on Wall Street asked if Venmo or Braintree could be separated. Enrique Lores previously oversaw HP’s split into two firms. These discussions reflect worries if branded checkout keeps falling behind rivals.

Earlier in the year, PayPal shares rose briefly after reports about a possible deal. The reports, which were not confirmed, said Stripe was interested in buying all or part of PayPal. PayPal has not announced any such transaction. The company remains focused on competing in a crowded payments market.

With inputs from PTI