PayPal (PYPL) is Finally Leveraging Venmo

Oh how the turn tables...after an explosive run in the last 2 years, SQ is falling behind PayPal in recent consumer mention growth.

What is going on?

• PayPal has reduced reliance on eBay and is effectively growing its number of new active accounts. On its last report, eBay represented ~5.5% of TPV (total payment volume) and PayPal expects this to be 3% by year-end. Transactions increased +34% YoY and the company added 14.5 million net new active accounts.
• PayPal supports more robust crypto offerings. In Q1, PYPL launched the ability for Venmo customers to buy, sell, and hold cryptocurrencies...and the options are more expansive vs. Cash App. While Cash App users can buy/sell/hold Bitcoin, Venmo users can buy/sell/hold Bitcoin, Ethereum, Bitcoin Cash, and Litecoin. In addition, PayPal is enabling crypto holders to actually PAY with crypto (via fiat conversion).
• These crypto offerings are elevating PayPal above Square overall when it comes to crypto engagement -- you can see vastly different trajectories on the chart below:

• PayPal is FINALLY leveraging Venmo. In addition to crypto enhancements, PayPal removed Venmo's global "public" social feed during a major redesign. By reorganizing its layout, it hopes to enhance the adoption of other features...sounds familiar, right?
• Venmo is also focusing on facilitating payments with small businesses (vs. sticking to only peer-to-peer). The app currently has more than 300,000 small businesses connected, 200,000 of which were added in Q1 alone. A very convenient crossover for users.

PayPal reports 21Q2 earnings July 28 after the bell...and it's clear the company is gaining momentum. The fruits of its Venmo investments may not be revealed this quarter, but we've got a close eye on long-term ecosystem adoption.