PayPal competitive advantages

PayPal is a technology company of American origin that was founded in the year 1998. Initially started as a security service for mobile phones, the company changed its focus to digital payments and online wallets soon after its inception. That proved to be a turning point for the company, with it being the largest cross-platform payments application in the market currently and having annual revenues of around $26 billion. It has been a member of the Fortune 500 list of companies for a long time. PayPal has a number of advantages that set it apart from its competitors. They include the brand’s strong positioning financially, global brand value, and the ability to generate a free cash flow. In this article, we shall be looking at a few competitive advantages of PayPal.

PayPal competitive advantages

Cost-based advantage – Huge profits

The majority of the companies took a hit in the pandemic, resulting in drastic falls in sales and gross margins. However, PayPal benefitted from the pandemic instead, with more people required to shift their focus to online payment methods. 

This resulted in huge profits for the company in the market, with the annual profit in FY 20-21 being somewhere around the $13 billion mark.

Free cash flow

This, really, is an extension of the previous point. Huge profits mean that there is a steady cash flow within the company. It facilitates PayPal to try out new ideas and take some risks, as they would most certainly have some amount to fall back to in case the plan does not work out. The money can also be spent on advertisements in a bid to win over new consumers.

First mover advantage

PayPal was founded way back in the year 1998, giving the company a head start in the business. When PayPal was launched initially, hardly had people started using cellphones. But the company’s decision to switch to a digital payment platform worked wonders for it, and the results can be seen even today. 

Presently, PayPal enjoys an active user base of 391 million users annually worldwide. Many surveys have confirmed that it is the most trusted brand in the business.

Technology-based advantage

PayPal has a reputation for hiring the best of the minds available in the domain. The technology used by the app is top-notch, with PayPal even lending its security protocols and ideas to the federal government at times. 

The app uses 256-bit secure encryption for transactions. The company has managed to find the perfect balance between convenience and security, making it a popular choice among the customers. 

Broad range of services offered

PayPal had started as a cross-platform payments application. But the company realized soon enough that this alone was not going to be enough to generate the business targets they were looking at. As a result, several other services such as credit and debit cards, card readers, etc. were launched. 

Loans on a small scale are also offered by the company. All of these ensure that the company caters to a global and varied consumer base.

Widely accessible and available: 

This is another advantage that PayPal enjoys over its competitors because the application is available on both Google Play Store on Android and the iOS App Store. 

This is not always the case with competitors such as Samsung Pay and Apple Pay that are restricted to certain platforms and operating systems. PayPal’s wide availability has been a major influence in making the company the world’s largest payment platform.

Conclusion on PayPal competitive advantages

We have seen in this article all the relevant information regarding PayPal and the considerable advantage the company enjoys over its peers. The recent studies and analytics have unanimously pointed out the fact that PayPal is well placed to retain its numero uno position in the payments service area. The smart decisions taken by the company internally, coupled with the excellent acquisitions of late, have all played a part in the success of PayPal.

Frequently Asked Questions on PayPal competitive advantages

Question. Who are the major competitors of PayPal?

PayPal faces competition from all of the third-party payment apps such as Google Pay, Apple Pay, Samsung Pay, etc. Although credit and debit card companies have a different line of business, yet, it would be safe to say that they offer a serious threat to PayPal as well in terms of the number of transactions processed.

Question. What are the six factors of competitive advantage?

Competitive advantage, by the definition of modern economics, depends on the following six factors: price, location, quality, selection, speed, and service. Each of these factors has equal significance in driving a brand forward and making it successful.

Question. Should PayPal be worried about its competitors?

As of present, the answer to this question would be a resounding no. The smart policies and the management at PayPal have done enough to consolidate its strong position in the global market.

PayPal competitive advantages

Leave a Reply

Your email address will not be published.

Scroll to top