Despite road bumps, PayPal posts strong Q4 and looks to super app to bolster performance in 2022

By the numbers: PayPal’s total payment volume (TPV) increased 23% year over year (YoY) in Q4, in line with Q3’s 24% YoY growth, per PayPal’s earnings release. TPV growth slowed from Q4 2020, when it grew 36% YoY.

The firm added 9.8 million accounts in Q4, 3.2 million of which stemmed from its Paidy acquisition in September. Transactions per active account—which PayPal uses as a metric for engagement—grew 11% YoY, in line with Q3’s performance.

More on this: On the company’s earnings call, chief financial officer John Rainey said PayPal started off the quarter strong, noting October’s “pull forward in holiday shopping.”

But he also outlined factors that contributed to a softer end to the quarter:

• Rainey blamed the omicron variant in December and inflation for weaker user spending. He said the lack of stimulus funds—which helped boost spending last year—also hurt PayPal’s volume growth in Q4, especially for lower-income customers.
• The migration of eBay’s business also hit PayPal’s metrics: Last June, eBay began managing its own seller payments, which were previously handled by PayPal. CEO Dan Schulman said the migration happened faster than anticipated.

Looking ahead: In 2022, PayPal intends to focus on user engagement—and its super app will be key in this initiative.

• PayPal plans to convert medium-engaged users into highly-engaged users. Schulman said this approach has proved to be more effective than trying to retain low-engaged users, which is more expensive.
• In September, the firm launched its long-awaited super app. The redesigned PayPal app includes several new services like direct deposits, savings accounts (powered by Synchrony), a shopping hub featuring an integration with Honey, and a crowdsourced fundraising platform. So far, it has paid off: Average revenues per active account double when customers use the app versus just checkout, according to Schulman.
• New integrations into the super app can also encourage more spending among active users. In early January, PayPal confirmed that it was exploring a proprietary stablecoin. While the company has yet to make any decisions on it, a stablecoin could tie in well with its super app and let it tap into growing demand for digital currencies.

Related content: Check out the super app section of our “Insider Intelligence’s Payments Trends to Watch in 2022” report for our take on the super app phenomenon within the payment space.