PayPal launches Checkout with Crypto

The payments giant rolled out “Checkout with Crypto” after announcing the feature last October, a huge step forward for cryptocurrency payments. It lets customers in the US use crypto in their PayPal wallet as a funding source at checkout, converting the crypto holdings to fiat currency to complete transactions. The company will gradually roll out this feature to its global merchant network in more than 200 countries. PayPal first debuted its crypto service in the US in November 2020 and discussed its plans to invest in a crypto-dedicated business unit during the company’s Q4 earnings call.

PayPal’s entrance in the space will catalyze crypto retail payments.

• Incumbent payment players and crypto providers have started offering crypto retail payment services—so far with minimal adoption. Together, Visa and Mastercard have already launched 39 crypto card programs, according to data provided to Insider Intelligence from The Block. But volume on the cards remains insignificant: CoinZoom Visa card users spend on average $1 million per month on the crypto cards, CoinZoom marketing director Adrianne Blackett previously told Insider Intelligence—a paltry share of Visa’s $603 billion total US debit volume in Q4 2020. And other digital crypto payments have only just gotten off the ground: Gemini Pay from crypto exchange Gemini enables crypto spend using a QR code at only 30,000 retail locations in the US.
• Given PayPal’s massive network, “Checkout with Crypto” could catapult crypto payments into the mainstream. Consumer demand is rising for crypto payments, and given PayPal’s 377 million total active accounts, this rollout could be a powerful growth driver––especially since the service doesn’t require any additional onboarding for existing PayPal users, unlike crypto cards. It can also benefit merchants that accept PayPal because it lets them keep up with consumer preferences without having to invest in additional hardware or resources.

PayPal’s crypto push could spell trouble for Cash App and its niche feature set. The Square-owned Cash App made a name for itself as the peer-to-peer (P2P) app that lets users buy and sell crypto: Cash App’s Bitcoin revenues skyrocketed nearly 900% year over year (YoY) in Q4 2020, reaching a value of $1.76 billion. And crypto use has skyrocketed on the app: In January 2021, more than 1 million customers bought Bitcoin for the first time using Cash App, compared with 3 million total Bitcoin users in 2020. But PayPal’s latest development could cut into this revenue and erode Cash App’s competitive advantage because it lets users do more with their crypto than they can on Cash App. The P2P app may need to follow in PayPal’s footsteps to stay competitive and keep its user base from moving to the payments giant.