Why PayPal Sees a Huge Opportunity in Canada

Automating supply chain processes

PayPal (PYPL) announced recently that it was partnering with Canada Post to launch an integrated payment and shipping platform to serve Canadian vendors. The announcement followed last month’s report, which detailed limited penetration of digital payments among small and medium-size businesses (or SMBs) in Canada.

The study, dubbed Canadian SMB Landscape Study, was commissioned by PayPal Canada and revealed that only 17.0% of Canadian SMBs accept digital payment. The partnership between PayPal and Canada Post will automate a lot of supply chain processes for Canadian SMBs. For example, merchants will be able to print shipping labels, pay for shipping, and track their orders within their PayPal account. They can also schedule order pickup to save time and money.

Why PayPal Sees a Huge Opportunity in Canada

Opportunity to enroll more business customers

The move in Canada could help PayPal recruit more merchant customers and unlock more opportunities for its lending business, which has supplied more than $3.0 billion in loans since 2013. The limited online payment penetration in Canada implies that Canadian merchants have yet to realize their full potential.

PayPal sees a huge opportunity in Canada’s SMB market

According to PayPal’s estimates, Canadian e-commerce spending will hit $42.0 billion by 2018. That’s a more bullish forecast compared to Forester Research’s prediction that online retail spending in Canada will hit 39.9 billion Canadian dollars by 2019, up from an estimated 22.3 billion Canadian dollars in 2014.

The alliance with Canada Post could also bolster PayPal’s competition with Square (SQ), Apple (AAPL), Amazon (AMZN), and Vantiv (VNTV) for business customers.