According to sources familiar with the situation who spoke to Reuters, the potential deal has come to symbolize just how much PayPal’s situation has changed. In 2021, the company’s market value reached $360 billion, but then its growth slowed, competitors began expanding their presence, and attempts to find new growth areas failed to yield results.
Today, PayPal is losing ground not only to Apple, Google, and Samsung, but also to younger players such as Stripe and Affirm. According to PYMNTS Intelligence, last year Apple Pay overtook PayPal for the first time in the U.S. payment services market, widening the gap to 10 percentage points.
Investors are attracted by the scale of PayPal’s business. The company serves more than 400 million user accounts, is developing merchant acquiring services, and owns the money transfer service Venmo. That is precisely why potential buyers are assessing whether it would be more profitable to keep the company as a single business or to sell off its individual assets.
Analysts believe the company has been resting on its past laurels for too long, while the market has been changing rapidly. PayPal has been slow to develop mobile payments, digital banking, and new e-commerce formats, and has fallen behind its competitors in the adoption of artificial intelligence and agent-based commerce, where AI independently makes purchases on behalf of the user.
“Why even become a digital bank when you can just be the world’s biggest ‘checkout’ button?” said Dan Dolev, a senior analyst at Mizuho, commenting on the company’s strategy.
According to Clear Street analyst Owen Lau, PayPal tried to maintain its market share through aggressive price cuts but was unable to achieve sufficient profitability. Growth in key segments, including Venmo, has slowed, and new products, such as the “buy now, pay later” service, have fallen short of expectations.
Constant leadership changes have created additional uncertainty. PayPal has had three CEOs in four years. In March, Enrique Lores took the helm after the board of directors acknowledged that the pace of transformation was not meeting expectations.
According to Reuters, internal disagreements also arose last year over a potential partnership with OpenAI to integrate PayPal’s digital wallet and payment infrastructure into ChatGPT. A source at the agency reported that the board of directors insisted on postponing the deal.
Despite the offer from Stripe and Advent, Reuters sources say the board of directors is not yet ready to support a sale under the current terms. Wall Street analysts, however, do not rule out a higher bid. According to Reuters, the potential buyers have $17 billion in equity and have secured up to $50 billion in bank financing, which would allow them to improve their offer.
PayPal itself declined to comment.
