PayPal’s slowdown began to improve in April as stay-at-home orders tick up e-commerce usage

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In Q1 2020, the digital payments titan posted $191 billion in total payment volume (TPV), up 19% annually — representing a steep deceleration from its 25% growth in Q1 2019. This downturn came largely because of the coronavirus pandemic, which drastically reduced consumer spending overall, in turn impacting PayPal’s business.

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However, PayPal’s business began to improve starkly in late March and April, when it saw “unprecedented demand,” per CEO Dan Schulman. In an experience that sharply diverges from other payment firms, PayPal saw transactions jump 22% annually in April, garnering $68 billion in TPV — 40% of its Q2 2019 total. And it isn’t stopping, with May 1 marking the largest day in PayPal’s history, per the firm’s earnings call.

As stay-at-home orders and consumer wariness sharply tick up e-commerce usage in all categories, and digital payments grow in other segments, PayPal’s wide reach and large audience are paying off. Further, the brand’s results make a case for other payment firms to double down on e-commerce as much as possible.

Massive customer additions as the economy moved online represented a big bright spot for the firm and likely helped its business improve.

• PayPal added 20.2 million new accounts in Q1 2020. About half of these were a one-time gain from the integration of Honey, which the firm acquired in late 2019. But 10 million is a Q1 record for the firm, contrasting with 9.3 million last Q1. PayPal’s customers had been increasing at a steady pace, but the acceleration amid the pandemic likely comes from a mix of customers hunting for ways to begin paying digitally more easily and merchants migrating to online retail until they can open their doors again.
• And April’s customer gains are positioning the brand for an even stronger Q2 2020. PayPal came close to lapping its organic Q1 2020 gain in April, with an increase of 7.4 million users — up 135% annually — and customers are continuing to join at a rate of 250,000 daily, per the firm. As stay-at-home orders in many states stretch on, and retail reopens as largely curbside business, more sellers are likely looking for ways to offer online payments and more consumers are signing up for ways to make them.

Moving forward, PayPal has numerous opportunities to continue to grow as the pandemic “dramatically” accelerates the shift to digital payments, per Schulman. Even as stay-at-home orders are lifted, we expect e-commerce to stay substantially elevated for awhile. This is good news for PayPal, which can serve merchants turning to online for the first time with its suite of merchant services, as well as for services like Pay with Venmo, which the brand has been looking to expand as a monetization tool.

The pandemic could also propel the brand’s rumored pursuit of in-store payments and open a new line of business: Schulman noted that there’s substantial interest from parties looking for low-contact, affordable ways to pay. If, as we move into the next stage of the pandemic, PayPal can position itself as the top choice for providers looking for easy ways to enable electronic payments, it’ll likely fare better than most in the current climate.

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