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PayPal is focusing on moving into China and launching Venmo's first credit card

PayPal is focusing on moving into China and launching Venmo's first credit card

This story was delivered to Business Insider Intelligence Payments & Commerce subscribers earlier this morning.

The company's total payments volume (TPV) reached $178.7 billion, growing 27% year-over-year (YoY) on a constant currency basis, per its earnings release.

This marks the seventh consecutive quarter in which TPV grew between 25% and 27% on an annual basis. Meanwhile, its number of active accounts jumped 16% YoY to total 295 million, which is the eighth straight quarter where the metric's annual growth came in between 15% and 17% YoY, highlighting PayPal's consistent strong growth.

The company is now embarking on two key initiatives - its move into China via its acquisition of GoPay and its forthcoming Venmo credit card - that could cause its performance to surge in the future.

Becoming the first foreign online payment platform in China should enable it to boost its TPV and account number, both in China and abroad. Taking a 70% stake in GoPay, which is licensed for online and mobile transactions, gives PayPal the ability to reach China's domestic and international payments industries in a way other foreign companies can't. It may have trouble breaking into the domestic industry because of established players like UnionPay, WeChat Pay, and Alipay, but cross-border payments and e-commerce may be a valuable opportunity.

For example, PayPal could enable Chinese consumers to make purchases from its international merchants and help Chinese merchants sell abroad, CEO Dan Schulman said on the company's earnings call. Such efforts might bring more merchants, consumers, and volume into PayPal's ecosystem, propelling its performance to new heights. The cross-border opportunity for PayPal may be massive considering China's cross-border e-commerce imports were reportedly worth 1.9 trillion yuan ($269 billion) alone in 2018, which would enable PayPal to build on the $31 billion in cross-border trade TPV it posted in Q3 2019.

The introduction of Venmo's credit card in 2020 could help PayPal better monetize its peer-to-peer (P2P) payments platform. Venmo's TPV continues to rise - it surpassed $27 billion in Q3 2019, growing 64% YoY - and 35% of its users have used one of its monetized actions. However, it still needs to improve since it may not be profitable yet.

The launch of Venmo's first consumer credit card, which will be issued by Synchrony, could help this process by giving Venmo new revenue opportunities that would make it more valuable to PayPal's overall performance. It's not guaranteed to succeed, though, since the card will need to attract consumers, who could be using any number of competing cards, so the formulation of its rewards program and recruitment strategy will be key in determining how the initiative fairs for PayPal.


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