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PayPal’s FundsNow Simplifies the Seller Experience

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PayPal is now allowing sellers instant access to funds

PayPal (PYPL) is rolling out a new feature called FundsNow, which allows businesses instant access to funds from sales. FundsNow has been tested by more than 1 million sellers, and it’s now rolling out broadly, first in the United States, the United Kingdom, and Australia.

Before FundsNow, sellers who used PayPal to accept payments could wait for up to 21 days to access funds from completed sales. Delays in access to funds were the result of PayPal needing more time to scrutinize transactions to ensure there was no fraud going on. But the company has gotten better at detecting fraudulent transactions, so it feels it can now let sellers access their funds immediately. PayPal acquired online fraud prevention specialist Simility earlier this year for $120 million.

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Revenue rose 23%

What’s the purpose of FundsNow? Since funding delays can prevent a seller from investing back in his or her business for growth or from paying bills on time, FundsNow may encourage more sellers to recommend that their customers pay with PayPal, which could generate more business for PayPal.

PayPal earns a fee when people use its service to pay for purchases. The company generated revenue of $3.9 billion in the second quarter, up 23% YoY (year-over-year). Square (SQ) and Amazon (AMZN) grew their second-quarter revenues 47.8% and 39.3%, respectively, YoY (year-over-year). Revenue was up 42% YoY at Facebook (FB) and up 25.6% YoY at Google parent Alphabet (GOOGL) in the quarter.

Boosting customer retention

PayPal serves some 19.5 million businesses, the majority of which are small merchants. It has ~244 million active customers in total. The company is facing stiff competition from Amazon and Square for merchant customers. FundsNow has the potential to help PayPal boost its merchant customer retention.

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