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Is the EU Out to Slow PayPal’s Growth?

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EU wants its banks to challenge PayPal

In 2018, the European Central Bank launched a new platform for the settlement of instant payments across the European Union. The platform—known as the TIPS (TARGET instant payment settlement)—allows payment service providers in Europe to offer their customers instant fund transfers around the clock.

The aim of TIPS is to help European banks and payment providers better compete with their international counterparts, such as PayPal (PYPL).

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Rules to help banks put pressure on PayPal

Now the European Union looks so determined to help its banks challenge PayPal and other foreign payment providers that it’s considering new rules to expedite the uptake of TIPS, according to a Reuters report. In addition to PayPal, Google (GOOGL), and Facebook (FB), Alibaba (BABA) and Tencent (TCEHY) are other foreign payment companies that may come under more competitive pressure in the region if the TIPS platform ends up becoming popular with European banks and consumers.

Google runs a mobile payment service called Google Pay, while Facebook has teamed up with PayPal to enable it to build a payment capability into its Messenger chat app. On their parts, Alibaba and Tencent are seeking to drive the global uptake of their Alipay and WeChat Pay services, respectively, and Europe is a key target given that many Chinese tourists travel there every year.

Europe is part of PayPal’s International segment

It remains to be seen how PayPal will cope with the TIPS challenge in Europe, a market that falls under its International segment. So far, PayPal has been making gains in its International segment, with its revenue rising 20% year-over-year to $2.0 billion in the fourth quarter of 2018.

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