PayPal eyes Venmo as path to profitability

During the company’s earnings call, PayPal CEO Dan Schulman told analysts that the payments giant might combine its rewards program with Venmo’s, and may link Venmo and PayPal peer-to-peer (P2P) payments capabilities to boost interoperability. PayPal’s revenue rose 9% in Q2 compared to last year.

Why should we care?
Schulman’s pronouncements may reveal PayPal’s new direction under the wing of activist investor Elliott Management, which recently took a $2 billion stake in the payments giant. As expected, it seems PayPal is largely jettisoning its crypto initiatives, while also cutting costs by reducing its office footprint and hiring from "lower-cost geographies." In addition, PayPal may play a more involved role in subsidiary Venmo’s development as a way to solidify PayPal’s market dominance in the payments space. "The bigger [networks] are, the more valuable they are and the ability to start to link PayPal and Venmo P2P through interoperability, I think is a big opportunity," Schulman told analysts. This is a notable deviation from PayPal’s relatively hands-off approach to Venmo and from PayPal’s previous superapp plans—ambitions also shared by Walmart, which poached PayPal’s former CFO, John Rainey, earlier this year. By focusing on its P2P and checkout revenue streams instead of diving into a moonshot superapp effort, PayPal may inadvertently encourage Walmart to reconfigure its own fintech plans, rendering the fintech space a more fragmented sector than superapp boosters would hope.