PayPal’s Q4 Shifts to Top Gear with Xoom and Venmo

After its Q3 2019 earnings release on October 23, PayPal (PYPL) stock has climbed 6.23% through November 11. The stock opened at $102.97 on November 12. PayPal’s third-quarter results beat market estimates when it declared a 25% increase in total payment volume.

The digital payments service provider took a variety of concrete steps in the third quarter, including one step in China. The acquisition of the Chinese mobile payment platform GoPay was the grand finale to close Q3 2019. Now, PayPal is making new strategic partnerships to boost the transaction volumes for the fourth quarter.

Domestic money transfer and cash pickup

Xoom, the international money transfer service backed by PayPal, now supports instant money transfer and cash pickup in the United States. With this service, Xoom customers can arrange a cash pickup from approximately 4,700 stores in the country.

In addition to its partnership with Walmart, Xoom also partnered with Ria, a subsidiary of Euronet Worldwide Inc. This facility should be available in Walmart and Ria stores throughout the United States. In August 2018, Xoom made a similar arrangement with Ria for its 150,000 stores overseas. Now, this agreement should encompass the 175 Ria locations in the United States.

According to the US Census Bureau’s 2018 American Community Survey, Xoom has an outreach of over 44 million people who were born in another country but reside in the US. This customer base relied on Xoom to wire funds to their family members at home.

Xoom’s client base could continue to grow and include domestic transactions, especially for P2P (peer-to-peer) domestic fund transfers. Customers would be able to securely transfer funds through the mobile app or the Xoom website. Additionally, the option to pick up cash from nearby Walmart locations and Ria stores could make the service more lucrative.

PayPal and Xoom

Xoom’s general manager and vice president, Julian King, emphasized that the new service could be well received. King said, “This rollout reinforces our commitment to make money transfers fast, easy and affordable for everyone, whether they are at home or on-the-go.” In July, PayPal had charted similar growth plans in Europe. At the time, Xoom had launched its funds transfer service in 32 European countries.

PayPal acquired Xoom in July 2015 for $890 million. PayPal CEO Dan Schulman was hopeful at the time that Xoom could accelerate PayPal’s presence in multiple key markets.

Venmo credit card launch

The Xoom initiative is not the only effort taken by PayPal in the United States during Q4 2019. Venmo, PayPal’s digital wallet and mobile payment service, plans to launch a new credit card for its customers in the US.

PayPal partnered with Synchrony Financial in October 2019 to issue the Venmo credit card. The first-of-its-kind co-branded credit card is expected to roll out by mid-2020. PayPal is working on increasing its consumer credit programs, and the Venmo Credit Card is another step in this direction.

Like Xoom, Venmo was part of PayPal’s expansion initiative. PayPal acquired Venmo’s parent company, Braintree, in December 2013 for $800 million. Since the takeover, PayPal has only disclosed Venmo’s total payment volumes until its Q1 2019 financial release. In April 2019, PayPal revealed that Venmo supported 40 million users and processed a payment volume of $21 billion in the quarter. In the latest quarterly performance release on October 23, Venmo has reportedly grown 64% and processed payments over $27 billion.

PayPal competitor Square outperforms market estimates

PayPal rival Square (SQ) beat earnings estimates for the third quarter of 2019. Square released its Q3 2019 results on November 6, which led to a 5% upward movement in the stock. Square provides a commerce ecosystem ranging from financial services to point-of-sale services for merchants and small businesses. Square’s gross payment volume was $28.2 billion, growing steadily by 25% in Q3 2019.