By Telis Demos
PayPal Holdings Inc. said it is expanding newer services such as
Xoom and Venmo as it seeks more ways to stand out from a bevy of
emerging mobile payments tools.
The San Jose, Calif., company's shares rose about 2% in
after-hours trading, after it announced that its total payments
volumes were $81 billion for the quarter, up 29% from a year ago,
and ahead of analyst expectations of $79 billion for the
quarter.
PayPal revenues also grew, but more slowly. Revenue in the first
quarter was $2.54 billion, up 19% from a year ago, and just ahead
of analyst forecasts of $2.5 billion.
The payment company's businesses contain its core online and
mobile e-commerce payments tools, and newer businesses like Xoom
and Venmo that it has acquired in recent years.
Excluding certain items, PayPal posted per-share earnings of 37
cents, up from 29 cents a year earlier, on a pro forma basis, and
above the average analyst estimate of 35 cents, according to
Thomson Reuters.
Since its separation from eBay Inc. last year, PayPal has sought
to find new ways to both expand its overall usage and defend its
pricing power as it faces off against an expanding array of
payments options for consumers, such as from Apple Inc.'s Apple Pay
to online checkout tools from Visa Inc. and MasterCard Inc.
"Larger merchants have much more volume, and therefore get a
lower price, " said PayPal's chief executive, Dan Schulman, in an
interview. But, he said, "every one of those dollars is
[profitable], and consumers can shop in more places."
Another factor is the rapid growth of Venmo, the
person-to-person payments app that PayPal acquired in 2013 that is
popular with young users who also make social-media postings about
their payments.
Venmo transaction volume grew 154% in the quarter from a year
ago, to $3.2 billion, but PayPal is still in the early stages of
making money from the free service.
Last quarter, PayPal said that Venmo would start a pilot to
allow users to use the service to pay for goods at some online
merchants, who would then pay fees to PayPal. It said that program
has grown to 550,000 users, and would be launched to all of Venmo
in the second half.
"The Venmo usage is pretty incredible," said Josh Olson, analyst
at Edward Jones. He said that "finding a way to monetize and
integrate [Venmo]" with PayPal's merchant customers was critical.
"Checkout with Venmo will be very important," he said.
PayPal in April led a venture fundraising round for Acorns Grow
Inc., which operates an investment app aimed at millennials opening
their first small accounts. PayPal said it was exploring possible
linkages with Venmo.
It also aims to win more big merchant business by showing it can
help convert shoppers, who often abandon purchases in online carts,
into buyers.
That includes expanding its One Touch product, in which users
sign up once and then port their payments options across multiple
websites and apps. PayPal said 21 million people had signed up for
One Touch, and that merchants in 144 markets were now using it.
PayPal also said it had launched contactless mobile payments in
Spain, via a partnership with carrier Vodafone Group PLC, ahead of
a broader Europe rollout.
Its Xoom service will expand to 53 countries, up from 30 before
it closed the acquisition of the international money transfer
business last November, PayPal said.
That includes a link with M-Pesa, a fast-growing digital
payments service in Kenya, which can then link Xoom payments to
things like paying bills. PayPal said that net new activations of
Xoom's app were up 70% from a year ago, reflecting its expanded
link with PayPal customers.
"We're creating a presence in emerging markets where there
hasn't been a presence for PayPal," said John Kunze, vice president
for Xoom, in an interview.
PayPal is increasingly facing some upstarts in international
payments. Xoom initially competed digitally with established money
transfer networks such as Western Union Co. and MoneyGram
International Inc. Now there are venture-funded firms such as
TransferWise, Circle Internet Financial Ltd., and Remitly, which
this week said it raised $38.5 million in fresh capital.
Mr. Kunze said that Xoom, which both digitally links with banks
and delivers cash via retail partners, focuses primarily on people
who are working in developed countries like the U.S. and sending
money home to their families in developing countries.
Some upstarts are "serving mass-affluent users," he said.
"They're not in the family remittances business."
Ezequiel Minaya contributed to this article.
Write to Telis Demos at telis.demos@wsj.com
(END) Dow Jones Newswires
April 27, 2016 20:06 ET (00:06 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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