PayPal Teams Up With Safaricom, Boosts Presence In Kenya

In a bid to expand its international reach, PayPal Holdings, Inc. (NASDAQ:PYPL) recently teamed up with Kenya-based Safaricom — a provider of voice, data, financial services and enterprise solutions.

Courtesy of the latest partnership, people of Kenya will be able to transfer funds from PayPal accounts to Safaricom’s M-PESA wallet and vice versa. The move is likely to boost e-commerce business of PayPal.

Further, the latest move will help the companies operating in Kenya gain traction in the e-commerce market. Also, Kenyan customers will now be able to shop seamlessly, courtesy of the easing of paying method.

TransferTo, which is an operator of a cross border mobile network payments, is the technology partner behind the latest collaboration.

M-PESA is a mobile phone app that helps to transfer money and provides financing and micro financing services. Its customer base, which currently exceeds 27.8 million, will help PayPal strengthen its footprint in Kenya.

Coming to the price performance, shares of PayPal have returned 80.8% over a year, outperforming the industry’s rally of 34.5%.

Deal Rationale

The deal is a win-win situation for both companies. The customer base of both the companies is likely increase with the latest move and this will help to generate substantial revenues.

The service is currently available to Kenyans who have M-PESA and PayPal accounts.

To date, money could be withdrawn from PayPal accounts in Kenya via Equity Bank’s 266 branches and 40,000 agents. The latest move will make money withdrawal easier as the company will leverage M-PESA’s wide network of agents, which currently stands at 148,000.

PayPal is well poised to take advantage of the growing e-commerce market in Kenya, partly aided by the increasing penetration rate of mobile use which currently exceeds 90%.

Per a Jumia Travel Kenya Hospitality report, e-commerce business in Kenya will continue to grow in 2018 and beyond as the internet use penetration rate in Africa currently exceeds 80%.

PayPal Holdings, Inc. Revenue (TTM)

PayPal Holdings, Inc. Revenue (TTM) | PayPal Holdings, Inc. Quote

Strategic Partnerships— Key Catalyst

Strategic Partnerships have been successful in shaping the growth trajectory of PayPal by developing its product portfolio and expanding global reach. With the latest move, the company strengthens its service offering to Kenyans.

Last year, PayPal teamed up with Google (NASDAQ:GOOGL) which enabled users link their accounts to Android Pay, Google’s digital wallet. This move helped account users shop and make payments through an android phone.

Also, the last year’s partnership with Facebook (NASDAQ:FB) helped PayPal to offer a customer service chat bot in Messenger to customers to handle account inquiries and payment issues through the app.

The company’s partnership with Visa expanded its point-of-sale acceptance at all retail locations where transactions can be made with VISA card. Last year, PayPal extended its ongoing partnership with Visa in the Asia Pacific region which further bolstered its footprint in the region.

The company has also partnered with Mastercard which helps it to expand its presence at the point of sale by utilizing token services from Mastercard in countries like Canada, Europe, Latin America, Africa and many more.

Zacks Rank & Stock to Consider

Currently, PayPal carries a Zacks Rank #3 (Hold).

Investors interested in the broader technology sector can consider some better-ranked stocks like Paycom Software (NYSE:PAYC) , Veeva Systems (NYSE:VEEV) and Nice (NASDAQ:NICE) . All the three stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Long-term earnings growth rate for Paycom Software, Veeva Systems and Nice is currently pegged at 24.75%, 17% and 12.5%, respectively.

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