PayPal is a phenomena we’ve seen in the fairly recent past, but it’s interesting to think about the possibilities of significantly challenging Visa or MasterCard and moving beyond the traditional eBay markets. If one does a very crude compounded annual growth rate comparison using info in the attached BusinessWeek article, PayPal gets to be about 20% of the size (payment volume) of Visa in 15 years. From BW,
And more than ever,
PayPal is knocking elbows with Visa, MasterCard, and the banks that
issue their cards. It just passed American Express, the leading bank
card issuer. PayPal now has 72 million worldwide accounts, compared
with AmEx’s 65 million. Yet that pales next to card associations Visa
International and MasterCard International Inc., with 1 billion and 680
million cardholders, respectively. Likewise, PayPal’s $19 billion in
total payment volume last year falls far short of Visa’s $3 trillion
from all of its member banks. PayPal, however, is expanding much faster
— 44% last year, to Visa’s 14%.
Sure folks at Visa can claim that (per the article) "consumers want to put as much of their purchases [as they can] on the payment vehicle they know and trust." That said, PayPal is kind of different animal. In some ways, the PayPal vehicle can be thought of being beyond convenience. There’s some other key psychological marketing and use factors in play beyond just trust. Like the casino chips one gets in Las Vegas, people can both receive PayPal payments and make PayPal payments like it it is just funny money (or email). And there’s no negative association with credit card debt and high plastic fees with PayPal. I bet the marginal propensity to spend PayPal dollars could be much higher than Visa in some sectors … not that we want to increasing spending … but that is yet another story.