A 2012 article on Huffington Post contained a telling headline: “Cash Dying As Credit Payments Predicted To Grow In Volume”. Today, if that article was republished, it would read: “Physical Transactions Dying As Mobile and Online Transactions Predicted to Grow in Volume”. Venmo, one of PayPal’s most popular subsidiaries, processed more than $700 million in transactions in the third-quarter of 2014 alone. PayPal proper was processing more than $315 million a day in 2011. While the company doesn’t regularly release these statistics, the current numbers have to be incredible.
Key Stocks and Companies to Follow in the Online Payment Space
The online and mobile transaction giants include Google Wallet (NASDAQ:GOOGL), Stripe Inc (Privately Held), ACH Payments (Privately Held), Authorize.net (Privately Held), Amazon Payments (NASDAQ:AMZN) and of course, the 800-pound gorilla in the room: PayPal (NASDAQ:PYPL).
What’s fascinating about PayPal’s model is that they’ve been rapidly acquiring the competition. Sure, a lot of the companies listed above are taking big chunks of niche payment markets by helping online entrepreneurs accept payments in an ecommerce space, but PayPal is playing on a totally different scale in the market.
PayPal Acquired Braintree in 2013, which Acquired Venmo in 2012
As Venmo became one of the hottest ways to quickly transfer money between friends using a smartphone in real-time (i.e. splitting the tab at a restaurant or paying a friend for a bad bet), PayPal took notice. They had split from eBay (NASDAQ:EBAY) and were quickly charting their own path forward by poaching the scalable mobile transaction market, and Venmo was in their crosshairs.
But why stop with Venmo, a fast-growing mobile payment platform? PayPal played it cool and waited for Braintree to acquire the startup, and once Venmo was neatly packaged in with Braintree's existing payment processing infrastructure, PayPal decided to pounce in 2013; acquiring the financial transaction giant just one year after their absorption of Venmo.
Today PayPal is using its subsidiaries within subsidiaries model to experiment with cryptocurrencies, like bitcoin, while keeping operating costs at a bare bone level and limiting their own exposure to potential failure. Braintree Hub is a powerful payment processing platform on its own, utilized by major companies like Uber (privately held) and AirBnB (privately held).
The problem, at least for customers of Venmo, is that they’re using a PayPal service without the protection and customer support that PayPal has become known for. Recent reports point to some major security issues for users of Venmo, with some users reporting major scam transactions that come in right under the daily $3,000 limit. Venmo does not have a dedicated phone line for reporting these issues and requires the use of an email support department that can be slow to respond to reports of fraudulent transactions.
For companies looking to accept payments online, PayPal proper is certainly a gold standard.