PayPal's Worst Headlines in 2015

PayPal enjoyed mostly positive press in 2015. As for the company's worst headlines, they actually weren't directly about PayPal.

PayPal's worst headlines of 2015

were press releases of competitors regarding formidable upcoming products.

•The clearest example is found in three companies seeking to enter or expand their presence in the mobile payments business, by providing digital wallets for retail customers to use in-store.

•Each or these notable corporations introduced a service with the word "Pay" in it during 2015. Does that sound familiar?

Headline #1:Walmart Pay

• Based on QR code technology, with transaction completed at point of sale.

• Built-in user base: 22 million customers who currently use WalMart's existing IOS and Android-based app.

• Service will be available in all 4,600 Walmart U.S. locations by mid-year.

• Walmart would have been a great customer for technologies PayPal is developing. Now it's rolling out its own in-store payment method.

Walmart Pay (cont.)

• Walmart is a major backer of a payments consortium called "MCX."

• Walmart Pay provides Walmart an alternative digital wallet, allowing it to leapfrog the slow-to-develop MCX technology, which is still in pilot mode.

• PayPal recently acquired Paydiant, counts MCX as a major customer, so the evolution of Walmart Pay isn't great news for the Paydiant division.

Headline #2: Chase Pay

• Mobile payment also based on QR code technology.

• Like Walmart Pay, a user will check out at the physical point of sale.

• Chase is developing the technology in conjunction with MCX.

• The company will launch its new service by mid-2016.

Headline #3: Samsung Pay

• Mobile checkout service has already been piloted in South Korea, where Samsung is headquartered.

• Will launch not only in the U.S., but multiple countries in 2016.

• Not just a digital wallet, but a broader mobile payments system.

• This will increasingly put it in direct competition with PayPal.

As PayPal races to develop an unmatched in-store purchasing experience which can interact with

retailers' loyalty programs, the field is getting crowded quickly: Banks (like Chase),

device providers (like Samsung), and even

retailers like WalMart are creating their own in-store,

mobile payment options.

The Big Idea

The Worst Headlines for PayPal Last Year Described Ominous Upcoming Competition. But That's Not Completely Bad News:• Companies with the massive scale of Walmart, Chase, and

Samsung will bring millions of customers into the mobile payments market.

• Some of these customers may bridge into PayPal products over the next several years.

• PayPal is close to rolling out partnerships with some notable mega-merchants itself next year. It also thinks that the market is large enough to accommodate many significant players, as the next slide indicates:

“"…we're working with one large merchant after another throughout not just the country here, but across the world..to be able to help merchants at point-of-sale, to look across payment types, [to] create a consistency across payments, across loyalty, across different technologies, that is hitting a real core with merchants…We don't think this is going to be a winner take all model. But the assets that we are bringing are really resonating, and we are having more strategic conversations on a daily basis with the largest merchants than we have ever had before."

Source: Q3 2015 earnings conference call transcript.

In the words of CEO Dan Schulman:

What's next...

Since the competing mobile payments described in this slideshow will be launched

from mid-to-end 2016, investors really won't be able

to gauge their impact on PayPal's business until late in

the year or early 2017.But it's a good idea to keep abreast of 2016 headlines

regarding mobile payments processing. We'll also keep you

updated on management's perspective on mobile

competition, in our frequent Foolish coverage of PayPal

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