Stablecoin Strikes: The Last Straw that Could Break North America's Payment Giant PayPal?

Once the disruptor, it is now being disrupted. PayPal (PYPL) once launched the era of online payments in North America with the aura of startup stars like Elon Musk and Peter Thiel. However, with the rise of new forces such as Apple Pay, Google Pay, and Block, as well as the accelerated penetration of stablecoins into the e-commerce payment space, the moat of this payment giant is being eroded little by little. Nowadays, stablecoins may be the last straw that breaks PayPal.

From Disruptor to Targeted

PayPal's revenue has maintained an annual growth rate of 7-8% over the past three years, with 2024 revenue reaching $31.8 billion, which seems robust. However, compared to the market value peak in 2021, the stock price has dropped by 80%, and the market value is only one-fifth of what it was.

The reason lies in the continuous loss of market share in the core payment business. From 2020 to 2023, PayPal's share of online payments in the United States plummeted from 54.8% to 40.29%, and its growth rate in 2024 is lagging behind the overall e-commerce industry. The decline in active user numbers and reduced transaction frequency have forced PayPal to lower fees and increase marketing investment, further squeezing profit margins.

Stablecoin Strikes at the Heart of PayPal

The competition focus in the North American payment market is on online scenarios, and e-commerce is the core territory of PayPal. However, this advantage is being eroded by stablecoin payments.

Stablecoins represented by USDC are bypassing traditional payment channels through direct collaboration with e-commerce platforms. For example, Amazon has announced a partnership with Circle to fully accept USDC payments, and Shopify is also collaborating with Coinbase to provide on-chain settlement solutions for merchants.

For merchants, stablecoin payments can avoid traditional transaction fees of 2.5%–3%, reducing costs while speeding up settlement. This is a positive impact for PayPal, which relies on transaction fees.

Business Model Conflict: Transaction-Driven vs Asset-Driven

PayPal's revenue model is typically "transaction-driven," relying on collecting fees for each flow of funds. In contrast, the core model of stablecoins is "asset-driven"—even without charging transaction fees, they can profit by investing users' deposited assets in U.S. Treasury bonds.

This means that once stablecoins become popular in e-commerce payments, their fee advantages will directly eat into PayPal's market share. Although U.S. regulations currently prohibit stablecoins from paying interest to users, fiat payments still have an advantage in the short term, but the long-term trend is hard to reverse.

PYUSD: PayPal's Counterattack and Predicament

PayPal attempted to participate in this competition through its own stablecoin PYUSD, which was launched first in August 2023. However, as of now, PYUSD's market share is less than 0.5%, far behind USDT and USDC.

The reason is that the main application scenario for stablecoins is still concentrated in cryptocurrency trading, rather than daily payments. The lack of a strong on-chain payment ecosystem makes it difficult for PYUSD to challenge existing giants in the short term. More realistically, before PYUSD becomes mainstream, PayPal itself has already been a "victim" under the impact of stablecoins.

Conclusion

PayPal once changed the global payment landscape as a disruptor, but now it faces the threat of being disrupted by a new generation of payment technologies. Stablecoins not only have advantages in terms of technology and cost but also directly target PayPal's core market—e-commerce payments.

If PayPal cannot establish new competitive barriers before the widespread adoption of stablecoin payments, the outcome of this payment war may have quietly been decided. For investors, the key points to observe next will be whether PYUSD can break through, and whether PayPal can find a new foothold in the era of on-chain finance.