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Banks beware as PayPal ramps up digital dominance strategy

At Mobile World Congress this year, PayPal unveiled a series of partnerships and innovations designed to propel its brand to the forefront of P2P, online payments, instore payments, and even retail financial services.

PayPal’s upcoming product launches, upgrades, and partnerships will support its vision to dominate consumer payments. It is entering the European proximity payments market through a partnership with Vodafone Wallet and is creating NFC functionality for its own app in the US and Australia. It is consolidating its position in online payments via a geographic expansion of its One Touch service, and is doing the same in the P2P market with a redesign of its app.

PayPal can now offer consumers almost every service a retail bank can offer. Its users can move money between their social (and business) contacts through PayPal, both domestically and across borders. They can make payments online and instore without revealing sensitive data. PayPal gives consumers access to credit for purchases and provides SME loans with advantageous and competitive terms. The role of a bank, in PayPal’s ecosystem, is a mere funding source. Of course, banks still have mortgages and savings accounts to offer, but PayPal is now in a position to dominate the transactional side of things.

This does not hold true everywhere, of course – in markets like the Netherlands (with iDEAL) and Denmark (with MobilePay), banks have been able to put popular tools in place already. For other players, it may be too late to avoid disintermediation now.

By Samuel Murrant, Senior Consumer Payments Analyst

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