When PayPal launched almost three decades ago, the company made its name as one of the world’s first fintechs. Now, PayPal faces a slew of competitors, from the payments colossus Stripe to Big Tech giants like Apple. “One of the challenges when you are at a certain scale and you’ve been around for a while is the very classic innovator’s dilemma,” Alex Chriss, the president and CEO of PayPal, told Fortune. “What you’ve done has worked, and are you constantly thinking about how to disrupt yourself?”
Investors are likely wondering the same thing. Since January, PayPal’s stock price has dropped more than 30% as it tries to halt competitors from encroaching on its core products of online checkout and peer-to-peer payments. In response, the fintech is looking to get a lift from next-generation payment products like stablecoins, and working to incorporate them across its operations and products.
“If you were to build the payments ecosystem from scratch today, it wouldn’t look like the way it does today,” said Chriss. “You would start to use some sort of blockchain, or some sort of thing that probably looks a lot like stablecoins.”
Early movers
Chriss isn’t a latecomer to crypto. Around 12 years ago, he split the bill for a steak dinner with his friend—but decided to pay his friend back with four Bitcoin. That’d now be worth more than $350,000 at current prices. “I remind him every once in a while when I see him just how expensive that steak meal actually was,” Chriss joked.
PayPal was also early to the world of digital assets. In 2014, around the same time Chriss was paying his friend back in Bitcoin, PayPal announced that a subsidiary would accept payments in the world’s largest cryptocurrency.
Despite that bout of early experimentation, PayPal largely stayed away from crypto until 2020, when it let users buy, sell, and hold Bitcoin, Ethereum and a handful of other cryptocurrencies in its digital wallet. It’s since expanded its crypto offerings and, in 2023, took a major strategic step with the launch of its own stablecoin, PYUSD.
“We’re a payments company and a commerce company globally, and so really the heart of what makes it really interesting about blockchain technology is thinking about stablecoin payments,” May Zabaneh, PayPal’s head of crypto, told Fortune.
Stablecoins are cryptocurrencies pegged to underlying assets like the U.S. dollar. Long popular among crypto traders, the dollar-backed tokens have more recently become touted as tools to upgrade legacy payments infrastructure, speed up cross-border transactions, and reduce transaction fees.
Amid the hype, the market capitalization of PYUSD has soared—from about $500 million at the start of January to nearly $4 billion in December. While that pales in comparison to the market leader Tether, whose own stablecoin has a market capitalization of more than $185 billion, PayPal is focused more on the strategic opportunities.
“Most people are focused on stablecoins’ trading market cap. They’re really doubling down in that aspect,” said Zabaneh. “But when you take it from a payments lens, you actually cut it in a very different way.”
Currently the payments giant is focused on integrating its stablecoin across its business verticals, bit by bit. Users can hold and earn rewards off of PYUSD in PayPal’s digital wallet and Venmo, another wallet the fintech owns. Customers who use PayPal’s payouts product, like YouTube, can elect to let recipients receive payments in the fintech’s stablecoin. And the company is even using PYUSD for its internal treasury. From August to October, PayPal transferred $1 billion in company funds across five of its corporate entities on three different continents, a spokesperson told Fortune.
Meanwhile, the company also lets customers use its stablecoin at checkout, and is testing a feature to let existing merchants use PYUSD to pay their bills. “How do we enable consumer-to-business transactions and actually disrupt payments by leveraging stablecoins?” asked Chriss.
Still, analysts are skeptical that PayPal’s stablecoin ambitions will have any immediate impact on its bottom line in the near term. “There has been no real impact to the business today,” Nate Svensson, a director in equity research at Deutsche Bank who follows PayPal, told Fortune.
But, that doesn’t mean there won’t be an impact in the future. “If I [were] running PayPal, I would be doing the exact same thing,” added Svensson. “I would be coming up with these solutions and capabilities, just in case there is a future eventuality where you and I start using crypto or stablecoins on a day-to-day basis.”
And it’s a future that PayPal CEO Chriss, who happens to own two hippo-themed NFTs, believes in. “Crypto within PayPal as a priority is top down. It’s being led by me,” he said. “I’m making sure that crypto is top of mind and something that we’re investing in as a company.”
