Is PayPal Poised to Enter the Stock Trading App Arena?

Stock trading apps take the mystery out of investing, helping complete novices to make savvy investment choices. With the ability to carefully research investments, track your portfolio, or even trade on autopilot, there has seen prolific growth this year in the stock trading app market, from Fidelity to Charles Schwab.

Launched in October 2000, PayPal has pioneered the digital payment sector. Even in its early days, the company skyrocketed in popularity, reporting a 10% daily growth rate. In 2002, PayPal became a publicly traded company, its stock growing to 55% on NASDAQ in the same year. The phenomenally successful startup was acquired by eBay in July 2002 for a reported $1.5 billion. PayPal’s traction grew even stronger, with the company entering a new era of success when it in turn acquired both the VeriSign payment solutions and Braintree payment gateway.

A possible shift into new territory

Today, PayPal enables users to withdraw funds in more than 55 currencies worldwide, having earned an international reputation as the safest, most successful, and most secure online payment gateway in the world. According to reports, PayPal is currently investigating the viability of presenting its own stock trading platform, enabling existing customers to buy and sell individual stocks. According to sources, the company hired a brokerage industry veteran to lead an investment arm of PayPal, marking a shift into new territory for the company as it diversifies its operations.

In 2020, PayPal broke out into the cryptocurrency market, enabling users in the United States to hold, buy, sell, and check out using a variety of different cryptocurrencies including bitcoin, litecoin, ethereum, and bitcoin cash, investing as little as $1 in digital currencies via their existing PayPal account.

After rolling out the new cryptocurrency platform, industry insiders suggest that PayPal has set its sights on the stock trading market. PayPal enlisted the help of Rich Hagen, a brokerage industry veteran from Ally Invest who was appointed CEO of Invest at Paypal, according to sources.

Accelerated growth

The trading app market has seen accelerated growth in recent months. According to data published by JMP Securities, the first half of 2021 saw a 10 million increase in new investors. Experts cite a combination of government stimulus checks, pandemic-related stay-at-home orders, and a rising tide in viral events like GameStop as the driving force behind increased interest in trading, with companies like Robinhood enjoying explosive growth, the latter company reporting an increase of more than 22 million customers in 2021, and doubled revenue compared with the previous year’s figures.

There is speculation that PayPal may join forces with an existing stock trader or buy-out an existing broker-dealer, with one source reporting that the company has already had preliminary discussions with potential industry partners. After CNBC reported that PayPal was exploring ways of enabling its US customers to trade via a new platform, PayPal’s shares rose by more than 3%, while Robinhood shares fell in the same proportion. Both CNBC and Reuters approached PayPal for comment, but no response was forthcoming.

Retail trading boom

With SoFi, Square, and other major fintechs rolling out their own stock trading platforms, reports that PayPal may be about to enter the market come as no surprise to many investment experts. The news comes amid a major retail trading boom, although there has also been an increase in regulatory scrutiny, with regulators taking a closer look at the operations of some brokerage firms.

According to press reports, stock trading is not the only new arena PayPal is considering venturing into. On September 8, 2021, the Financial Times reported that PayPal was to acquire Paidy, a Tokyo-based buy now, pay later (BNPL) platform, for a reported $2.7 billion. This comes in the wake of Square’s acquisition of the Afterpay BNPL group in a deal valued at $29 billion, making history as the largest corporate takeover in Australian history. Meanwhile, shares in another BNPL company, Affirm, soared after the San-Francisco based company announced a partnership with Amazon, enabling shoppers who place orders for more than $50 of goods via the site to pay in monthly instalments.

A pioneer in the digital payment sector

Touted as one of Japan’s few “unicorns,” i.e. a startup worth more than $1 billion, Paidy launched the country’s first interest-free post-payment service in 2020. By March 2021, the company was valued at $1.3 billion. Along with PayPal, Paidy has been backed by several other major investors, including Soros Capital Management and Goldman Sachs

PayPal has pioneered the digital payment landscape, but as with any company, the key to longevity is ingenuity. PayPal continues to diversify its operations and products, developing a presence in a variety of different sectors. After all, as CFO John Rainey points out, it is hard to be an everyday part of your customers’ lives if you only deal in online payments. With 17 million merchants and 200 million personal customers, PayPal’s potential reach is stratospheric, leveraging the company’s vast existing client base and taking customers along for the ride as it ventures into new territories.

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