PayPal Earnings Reaction: What it Means for Fintech

Despite exceeding expectations with its third-quarter earnings report, PayPal’s stock is currently experiencing a decline in after-hours trading. The reason for this downturn isn't immediately apparent, but it may be due to retail investors holding expectations higher than those of analysts for the well-performing company.

Even though it didn't fully satisfy investor sentiment, the company’s results suggest continued positive momentum for the wider financial technology sector.

PayPal announced revenues of $5.46 billion and adjusted earnings per share of $1.07 for the third quarter of 2020. These figures surpassed analyst predictions of $5.43 billion and $0.94, respectively.

Beyond its financial statement, PayPal shared a significant amount of data specific to the fintech industry, revealing that the increased consumer adoption of fintech services observed during the pandemic appears to be ongoing. The company specifically noted its strongest growth rate in total payment volume on record.

Specifically, PayPal facilitated $247 billion in transactions, a 38% increase compared to the same quarter last year, and processed 4 billion payments, representing a 30% rise over the same period. This is encouraging news for startups focused on enabling consumer or business payments, as their potential market is expanding rapidly.

PayPal also increased its projected full-year payment volume growth from the “high 20s” percentage range, as stated in its Q2 earnings, to “approximately 30%” by the end of Q3 2020, further supporting the positive outlook for the fintech industry.

Additional metrics reported by PayPal were also favorable, with Venmo payment processing volume increasing by 61% year-over-year to $44 billion. This growth rate accelerated from 52% in Q2, when compared to the corresponding periods in the previous year.

Furthermore, PayPal’s “payment transactions per active account on a trailing twelve-month basis” increased from 39.2 in the second quarter to 40.1. This figure rises to 41.7 when including the impact of the Honey acquisition, which was finalized earlier this year.

These results point to robust e-commerce activity and strong consumer interest in fintech solutions.

It is still too early to draw definitive conclusions regarding PayPal’s new Venmo credit card and its cryptocurrency initiatives, which recently contributed to an increase in the price of bitcoin. However, based on PayPal’s earnings, overall consumer engagement with fintech appears to be strong.

Square will release its earnings report later this week, providing another data point regarding the adoption of fintech, as the company handles both business and consumer payments, as well as cryptocurrency transactions.