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Why PayPal Wants to Partner with Amazon

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Aug. 13 2018, Published 7:13 a.m. ET

PayPal looking to deepen penetration abroad

PayPal (PYPL) has sought a partnership with Amazon (AMZN) for a long time, but a partnership has been elusive so far. But why is PayPal interested in a deal with Amazon? PayPal believes that partnering with large digital companies like Amazon will bolster its penetration in international markets, the company’s chief financial officer, John Rainey, told Bloomberg TV. So PayPal isn’t just looking at Amazon, it’s looking at any large digital company that could help it extend its reach. Rainey said that PayPal is still underpenetrated in many large markets around the world. The company wants to increase its penetration in markets such as China, India, Mexico, and Brazil.

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Amazon wants to encourage online shopping in Mexico

Mexico in particular could provide common ground for PayPal and Amazon. In recent years, Amazon has tried various ways to encourage Mexican consumers to shop online, especially by offering them more payment options. In October last year, Amazon introduced a way for Mexicans who shop at its online site to pay with cash. And in March this year, Amazon introduced a branded debit card for its Mexican customers as a way to encourage consumers without bank accounts to buy online.

Partnership with Facebook

Facebook (FB) is one of PayPal’s digital company partners. The partnership between the two has enabled PayPal customers to send money to one another through Facebook’s Messenger app, which boasts over a billion monthly active users.

PayPal’s revenue rose 23% YoY (year-over-year) to $3.9 billion in the second quarter. Amazon and eBay (EBAY) grew their revenues by 39.3% and 9.1% YoY, respectively, in that period. Revenue rose 47.8% for Square (SQ) in the second quarter.

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