PayPal partners with Visa amid strong growth numbers

A year after splitting with eBay, PayPal continues to grow faster than its former parent company, though the pace of growth has slowed down.

PayPal said its net profit rose to $436 million or 36 cents per share in the second quarter, up from $408 million or 33 cents per share in the same quarter last year.  That came in line with the profit of 36 cents a share expected by the Wall Street analysts, according to Forbes.

For the three months ending 30 June, the company reported revenue of $2.65 billion, up 15 per cent, from net sales of $2.30 billion in the second quarter last year. That beat the revenue of $2.60 billion estimated by the analysts.

Seconds before its earnings call, Paypal announced a partnership with Visa in an effort to offer greater choice in how consumers pay with the PayPal and Venmo wallets.

''This agreement opens new avenues for PayPal to collaborate with Visa, financial institutions, and others in the payments ecosystem to deliver greater value, more choice, and new experiences for our joint customers wherever they transact – online, in-app or in-store,'' said Dan Schulman, chief executive officer, PayPal.

For the second quarter, the total payments volume, or value of payments completed through PayPal, went up 28 per cent to $86 billion as compared to the second quarter of 2015. PayPal's active customer accounts increased to 188 million, up 11% from the prior year period.

Even as PayPal continues to grow, investors are concerned about the growing competition within the payments space. Last month, Apple announced that it will move beyond mobile apps and launch Apple Pay on the web before the holiday season. Investors are worried that this might slow down the pace of PayPal.

However, BTIG analyst Mark Palmer said, ''For PayPal, power of incumbency and first mover advantage will remain significant. And at this point, Apple Pay's growth is slowing domestically and is a big question mark internationally.''

Edward Jones analyst Josh Olson said in a report, ''One-fourth of transactions processed by PayPal are mobile-commerce transactions, which we believe will grow 36 per cent over the next four years.''

He added, ''Mobile-commerce represents a significant opportunity for PayPal and is being driven by convenience, higher security features, and customer loyalty initiatives. With a network of over 165 million active users across 203 markets, we believe PayPal has real advantages over its competitors.''

PayPal's popular peer-to-peer mobile payments app, Venmo posted total payment volume of $3.9 billion, up 141 per cent from the volumes in the same quarter last year.  In the first quarter of 2016, Venmo recorded 154 per cent jump in volumes that came in at $3.2 billion versus the prior year period.

For the third quarter, PayPal expects to post 16 per cent-18 per cent growth in net revenue, with earnings per share in the range of 33-35 cents. For the full year, PayPal projects EPS of $1.47-$1.5 and net revenue between $10.75 and $10.85 billion, a 17 per cent increase from 2015.