PayPal is an American online payment system company. It provides the service of online transfer of funds and money contrary to conventional payment methods via paper and checks. The company also offers its services to online vendors, commercial users, and auction websites. The brand charges a certain amount in return for providing the service of the online transfer of funds.
Ken Howery, Max Levchin, Yu Pan, Luke Nosek, Elon Musk, and Peter Thiel are the founding fathers of PayPal. They laid the foundation of the company in 1998. eBay acquired PayPal later in October 2002 at 1.5 billion US dollars and split off in 2015 to the shareholders.
The annual revenue of PayPal in 2020 was $21.4 billion US dollars, out of which the net income and profit of the company were $4.2 billion US dollars. Some of the main subsidiaries of the company are PayPal Credit, Braintree, Tradera, Paydiant, iZettle, Honey, Card.io, Venmo, Xoom Corporations, Network, and TIO.
Today, we’ll discuss the swot analysis of PayPal and how different internal and external factors impact the online money-transferring business.
Table of Contents
Strengths of PayPal
Some of the main strengths of PayPal are as follows;
Worldwide Operations
PayPal has reached and provided online funds transferring services in more than 200 countries worldwide. It gives the company a competitive edge in the online payment industry. Now, PayPal is moving into developing countries as well to mark its territory.
A large Number of Customers
PayPal has a large number of customers database in the online money transferring industry. According to a study, the company had approximately 403 million active users as of 2021. Over 80 million users use its one-touch feature. The number of merchant accounts was 29 million in the year 2020. It means that the majority of the public trusts the brand.
Variety of Services
PayPal deals with a variety of customers and merchants. Therefore, the company offers different types of services to its users. Like BillmeLater, PayPal here, Digital products selling an option, PayFlow Payment gateway, virtual terminal, and online invoicing.
Strong Tech Background
When eBay acquired PayPal in 2002 at 1.5 billion dollars, the first thing eBay did is to improve the security system of the brand and made it highly secure. Now the company is equipped with the latest technology and a better security system.
User Friendly
The interface of PayPal is user-friendly. Merchants and ordinary users can easily create an account and transfer funds with a few simple clicks. If any of the competitors would like to copy the interface of PayPal, then they would require a developer and a programmer. It’s user-friendly for the users, but it doesn’t mean that you can copy it.
Active Users
As we know that PayPal has approximately 305 million at the beginning of 2020. 192 million users were active by the end of 2016. In 2015, the company’s users conducted approximately 4.9 billion transactions in a single year.
Weaknesses of PayPal
Some of the main weaknesses of PayPal are as follows;
Exposure to Fraudulent Activities
It’s no doubt that electronic transaction is simple, easy, and convenient. But it also involves risk at the same time. Therefore, you need technical support and a secure system to conduct the transaction and transfer funds. It’s because there have been instances of cyber-attacks where hackers have stolen the private data of users and misused it later on.
High Service Fee
Some financial critics have criticized PayPal that the company charges high fees on card authorization, transactions, chargebacks, and international cards. High service fees push away potential newcomers. The brand should lower its prices for new users.
Controversies
There has also been some news and controversies about PayPal the company terminates, withholds funds, and freezes the accounts of some of the users. If there’s any truth in those controversies, then it’s very bad for the brand image of PayPal.
Depends on Internet Connection
The whole transaction system of transferring and receiving funds, and creating an account is dependent on the internet and speedy connection. It can work in the advanced and developed. But in emerging economies and under-developed countries, where internet connectivity is a serious issue, PayPal’s services would be useless there.
Restriction in Some Countries
Although PayPal has reached in more than 200 countries, it still hasn’t some of the fast-developing economies like Sari-Lanka and Pakistan. The company would get millions of active users soon after launching its service in those countries.
Opportunities for PayPal
Some of the opportunities available to PayPal are as follows;
Move Towards Lower Cash Economies
Developing economies like India are planning to become either cashless or lower-cash economies. It provides a great opportunity for PayPal to expand its services there to take advantage of the opportunity.
Digital Cryptocurrency
The usage of digital crypto-currency like bitcoins is becoming common nowadays for freelancers and online users. Many platforms even accept crypto-currency. It has increased because of many factors like digital literacy, internet connectivity, and the internet. It also presents an opportunity for PayPal to either launch its currency or start accepting it.
Linked with Business
PayPal can increase its customer base and funds transfer rate by linking with many B2C types of businesses.
Threats to PayPal
Below are the greatest threats to Paypal.
Strong Economic Regulations & Policies
Some countries like Taiwan, China, and Japan has strict rule and regulations for companies like PayPal to set up their business operations there.
Competitors
PayPal has very strong competitors like Google Wallet, WePay, etc. and they also have a large number of active users worldwide. They pose a great threat to the company.
Fraud & Hackers
When we look at the scale of the company’s operations, then it’s operating in more than 200 countries. It also presents a great security risk from hackers across the world.
Banks/Financial Services
PayPal used to have a great advantage when banks used to work manually. But nowadays, many banks provide the service of online transferring of funds.
Conclusion
After an in-depth study of the swot analysis of PayPal, we have realized that the company has a strong position in the online fund transferring market. But it shouldn’t ignore the threats like banks as an alternative option. The company should also take advantage of opportunities like expanding its market in developing countries.
