Photo by Fernando Hartwig & Geoff Livingston
PayPal Holdings, Inc. (PYPL) fourth quarter revenue jumped seventeen percent as reported in their quarterly conference call last week. They are knocking it out of the park. They are not new. In fact, PayPal has been with us for a couple decades already, but they have only been a stand-alone public company for less than two years since they left eBay (EBAY).
The Fintech sector – or financial technology sector – is relatively new and exploding with growth, and PayPal is becoming an important leader in this new space. The numbers PayPal shared during the fourth quarter call last week show very strong growth. They outlined their dramatic growth during their first full year on their own as a public company.
- Active accounts grew from 179 million to 197 million, an 18 million gain.
- 4Q revenue grew from $2.56 billion to $2.98 billion or a 19% gain.
- 2016 revenue grew from $9.24 billion to $10.84 billion or a 21% gain.
- 2016 mobile TPV jumped from $66 billion to $102 billion or a 55% gain.
- Venmo TPV grew from $2.5 billion to $5.6 billion or a 126% gain.
This shows how Fintech is transforming the traditional banking world. The mobile payment space is a rapidly growing sector, and will be for quite a while going forward as we transform the traditional banking and payment space with new ideas and technologies. Wireless is an important slice of this pie. There are many new Fintech competitors as this space grows, yet PayPal continues to hold a strong lead.
Fintech, Mobile Payment is Rapidly Growing Sector
The retail space is continually reinventing itself. More companies are joining in on this Fintech and mobile payment space every year. It’s a revolution of sorts. The sector is exploding with growth. In fact, this is one of the healthiest growth environments we have ever seen.
That does not mean every competitor will win. In areas with this kind of growth, we always see an explosion of new competitors. Some become leaders, some add something important to the industry. However, most don’t, and simply fade away or are acquired over the next few years.
I expect to see both growth from new companies and many acquisitions in this space. This is a very fertile playground… not unlike every other industry. Think about the cable television industry – it was full of smaller, regional players until a decade or so ago. Now, there are fewer and larger competitors like Comcast (CMCSA) and Charter (CHTR). Now, they are exploring expanding into wireless.
Similarly, the wireless industry was full of smaller, regional players until ten to fifteen years ago. After much consolidation, today there are four major wireless carriers: AT&T Mobility (T), Verizon Wireless (VZ), Sprint (S) and T-Mobile (TMUS).
Fintech Growth and Expansion Will Continue
This happens in industry after industry as they grow and mature. The same thing is happening with Fintech. It is not only growing, but it is going mobile or wireless, as is everything else in our world. And Fintech will continue to grow. We are just in the very early innings of this new game.
Expect to see more growth from PayPal and from competitors in the space. There are an increasing number of slices in the PayPal pie like Venmo, which are also very successful and rapidly growing. There are also a growing number of competitors and potential competitors like Zelle. This is a mobile, person-to-person payment service owned by a number of large banks. We don’t yet know whether this will be successful or not. Remember CurrentC never amounted to much.
Mobile Pay, Fintech, PayPal, Venmo, Zelle, Apple Pay, Google Wallet, Stripe
There are also quite a few new competitors like Apple Pay (AAPL), Google Wallet (GOOG), Stripe and so many others. They come from a variety of industry segments like mobile handset makers, banks and other financial institutions.
Larger and more traditional banks are at the biggest risk during this transformation. If they can innovate and stay with the changing wave, they can continue to grow. If they can’t, and if that wave passes them by, well then, they may just follow the same path as other industry leaders of yesterday like Blackberry (BBRY), Nokia (NOK) and Motorola (MSI). It happens all the time.
PayPal and their new competitors are growing in the Fintech space and mobile payment space, and taking market share from the traditional banks, one slice at a time. It reminds me of the story about dropping a frog into boiling water. When you do, it just jumps out. But if you put it in a pot full of room temperature water, and turn up the heat, one degree at a time, the frog will eventually be cooked.
This is the same warning the traditional banking industry should be getting, as PayPal and others continue to show strong growth. This entire money industry is continuing to innovate and reinvent itself. New leaders are getting a firm foothold. What will tomorrow look like? Your guess is as good as mine, but I sure like the momentum with companies like PayPal as long as they continue to show strong growth.
Jeff Kagan is an Equities.com columnist. Kagan is a Wireless Analyst, Telecom Analyst, Industry Analyst, speaker and consultant. He follows wireless, wire line, telecom, Internet, cable TV, IPTV, Cloud, Mobile Pay, FinTech and communications technology. Email him at [email protected]. His web site is www.jeffKAGAN.com. Follow him on Twitter @jeffkagan
