After the eBay (NASDAQ:EBAY) and PayPal split in 2015, industry observers believe PayPal is going to be even more vulnerable to competition from Apple Pay, Amazon (NASDAQ:AMZN), Stripe, Square and other mobile retail payment systems.
That is because PayPal does not have as much recognition among consumers as do brands like Apple (NASDAQ:APPL), Square and Stripe.
"If you're below 30, PayPal's not relevant," Gene Munster, an analyst at Piper Jaffrey, told Independent.ie. "With consumer awareness, Apple is out there overnight. That's a piece PayPal is desperately struggling with."
Even though PayPal has more than 152 million active registered accounts, the payments focus has shifted to smartphones. PayPal has tried to break into the smartphone market, without too much success. For example, it tried the Beacon check-out device for retailers and restaurants, which triggered customers' PayPal apps on their phones. However, customers were just not using it.
In fact, PayPal has placed its unwavering support behind Bluetooth low-energy (BLE) beacons as the mobile payments standard, even though cheaper near-field communication (NFC) tags allow consumers to just tap to pay at the register. Apple Pay is using NFC and, as a result, the easy-to-use technology is expected to drive many more consumers to pay for goods using their smartphones.
Apple Pay has another major advantage over PayPal: hefty supporters that include Visa, MasterCard, American Express, Bank of America, Capital One, JPMorgan Chase, Citi and Wells Fargo. It also boasts major retail partners, including Starbucks, Disney, Macy's (NYSE:M), McDonald's (NYSE:MCD) and Walgreens (NYSE:WAG).
Plus, Stripe got a boost last week when General Catalyst Partners created a $10 million fund to support new companies building products to run on the Stripe Connect platform. The importance of this is, just like Apple's iOS and Google's Android ecosystems, the more apps on the platform, the more valuable the platform.
Meanwhile, another PayPal competitor, Square, raised $150 million, led by the investment arm of the government of Singapore, this week. The group valued Square at $6 billion.
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