Large portfolio of credit customers

PayPal’s (PYPL) expansion into the alternative lending market is getting a boost from the acquisition of Swift Financial. As an alternative credit provider, Swift Financial has written more than $1.5 billion in loans and advances to small businesses since its inception in 2006.

Swift Financial is bringing to PayPal years of experience in the alternative finance market and a large portfolio of credit customers. More than 20,000 borrowers have utilized Swift Financial’s credit facility.

Alternative Lending: What’s the Opportunity for PayPal?

Unmet need in the alternative finance market

As PayPal pushes deeper into the alternative lending market, it is important for investors to understand the revenue opportunity that the company is pursuing.

Large lenders such as Citigroup (C), Bank of America (BAC), and JPMorgan Chase (JPM) have mostly retreated from the business of lending to small businesses and consumers to lower their risk profiles. As a result, the demand for alternative loans has increased.

A trillion-dollar industry

According to the Polsky Center, the alternative loan volume in the US (SPY) rose to $34.5 billion in 2016, up from ~$28.3 billion in 2015, as illustrated in the chart above. Therefore, the US alternative finance market alone presents a significant revenue opportunity for PayPal. In 2016, PayPal’s total revenues reached $10.8 billion, up from $9.2 billion in 2015.

Globally, the alternative lending industry is expected to grow to ~$1 trillion in the coming decade. PayPal is vying for revenue opportunities in the alternative lending market against companies like Square (SQ), Amazon (AMZN), and LendingClub (LC).

Latest articles

On September 14, drones attacked Saudi Arabia Aramco's oil-infrastructure. Saudi Arabia's oil production has fallen by 50%.

Apple Arcade (AAPL) is a subscription gaming service that was unveiled at Apple’s annual event last week. The service will launch on September 19.

Cannabis legalization is gaining traction not only in the US but also globally. The third presidential Democratic debate was held on September 12.

Google has agreed to make a one-time settlement of over $945 million euros to the French ministry. The ministry accused Google of evading taxes.

In Q4 2018, legendary investor George Soros sold all his holding in Apple (AAPL). In Q3 2018, Apple represented around 0.2% of his total portfolio.

Jim Chanos, the founder and president of Kynikos Associates, is a long-time short-seller of Tesla stock. Tesla stock has fallen 17.5% in the last year.