By Ezequiel Minaya 

A rise in the share of holiday shopping that happened over the internet and mobile phones helped push PayPal Holdings Inc.'s fourth-quarter revenue up 17%, executives said Thursday.

The San Jose., Calif. payments giant, spun out of eBay Inc. two years ago, said the total volume of payments it handled in the final three months of 2016 rose 22% from a year earlier to $99.35 billion. PayPal also said it added more new accounts in the quarter than it had in two years, helping to bring its total number of active accounts to 197 million.

"Mobile is going to drive the future of payments," said PayPal CEO Dan Schulman. "You're going to see a lot more volume driven by retailers rethinking their approach...and using mobile to compete with the likes of Amazon."

For the fourth quarter, PayPal posted income of $390 million, or 32 cents a share, compared with $367 million, or 30 cents a share, a year earlier. Excluding certain items, the company's per-share earnings rose to 42 cents from 36 cents, in line with analyst expectations.

Fourth-quarter revenue rose to $2.98 billion, in line with analyst expectations. But the share of revenue it takes from each transaction fell to 2.63% from 2.77% a year ago.

PayPal executives have been wagering that volume growth can outpace a drop in the cost of transacting as alternative ways to move money online proliferate and payments networks and banks look to keep more transactional revenue for themselves.

To expand its volume, PayPal over the past year has struck a series of new deals with Visa Inc., MasterCard Inc., Citigroup Inc., Facebook Inc. and others. These gave users more ways to load and spend money in their online PayPal and Venmo accounts. They also did more business with big merchants who demand cheap transaction rates but now widely accept payments via PayPal and Venmo.

"This is just the beginning," said Mr. Schulman, adding that conversations the company has with other leading financial institutions are "warm and welcoming."

The volume of person-to-person transfers on PayPal's popular Venmo apps more than doubled to $5.6 billion from the fourth quarter of 2016 and exceeded $2 billion in a single month for the first time. PayPal still doesn't charge for the service, but Mr. Schulman said efforts to monetize Venmo by enabling it to be accepted by merchants will begin in 2017 and be in full force by 2018 at the earliest.

As it expands, PayPal faces a range of new competitors. A group of big banks plan to introduce Zelle, a mobile person-to-person payments service, early this year.

Shares of PayPal, which have fallen 1.5% in the past three months, slipped 1.2% Thursday in post-market trading to $41.00.

For 2017, PayPal expects volatility in currency markets to be a challenge as just under half of its net revenues are generated internationally. That said, the company expects to earn between $12.45 billion and $12.65 billion, up from 2016 revenue of $10.84 billion.

Mr. Schulman also said the company is weighing a sale of its $5.1 billion book of consumer loans made at the point of sale and $600 million book of working-capital loans to merchants. He said offering loans was a "tremendous flywheel" for PayPal but that it would likely remain a small business. The company could just join with another lender for its credits.

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Ezequiel Minaya contributed to this article.

Write to Ezequiel Minaya at ezequiel.minaya@wsj.com

 

(END) Dow Jones Newswires

January 26, 2017 19:11 ET (00:11 GMT)

Copyright (c) 2017 Dow Jones & Company, Inc.
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