Payment companies seem to be increasingly straying from their core competencies in an effort to boost their transaction volume and account balances.
PayPal, for example, recently added a top executive with experience in the brokerage industry. Its goal is likely to build investment products such as a stock-trading platform. The service would join PayPal's other non-payment functions such as
While that may seem tangential, the addition of stock-trading capabilities gives PayPal users a way to invest any funds they have sitting in their accounts — and to draw more funds into PayPal for future investments.
The new PayPal executive,
By adding support for stock trading, PayPal would begin competing with specialized online investing apps like Acorn and Robinhood that don't necessarily have peer-to-peer transfers or merchant payment capabilities. Robinhood offers some ancillary products, and is planning a service that allows users to receive their paychecks two days earlier via direct deposit.
"It's a new business category.
PayPal is also in the process of building a super app, which would tie in payments with other services such as buy now/pay later and merchant credit. Even if some of those services seem situational, they strengthen the overall appeal of the app, experts say.
"Payments has become more of an end-to-end proposition," said Marco Salazar, director of payments at Javelin Strategy & Research. "This is a way for PayPal to acquire customers and make it stickier."
Square also offers stock investing and crypto through its Cash App, with crypto trading making up more than 70% of
More recently,
"The investment allows the consumers to achieve financial goals. In this case it's an investment in crypto and the card is a vehicle to do that," said Dov Marmor, chief operating officer of Railsbank North America. "There's an entire demo of people that don't want travel rewards. You can reach them by tying the payment to an investment."
Schwab offers a similar product with its investor card with American Express, which transfers cash back to a Schwab investment account. And banks such as
Even as a standalone service, the growth of both cryptocurrency and retail investing creates an opportunity for payment companies to increase the average balances of their customer accounts.
The value of bitcoin, for example, jumped from about $10,000 to nearly $60,000 between the fall of 2019 and summer of 2021 — high growth even given the cryptocurrency's price swings, according to
The share of off-exchange trading, which includes small companies and investment through apps, jumped to 47% of U.S. equity trading volume in January 2021, up from 41% in January 2020 and 37% in January 2019, according to
There are risks associated with retail investing that could cause problems for payment companies.
There's also potential regulatory pressure. The Securities and Exchange Commission is investigating
While PayPal would likely not be acting as an actual investment firm, it could still face similar blowback if there was a dramatic market swing or other event-driven trading curbs, according to Salazar.
"If there are limitations like what happened with GameStop, consumers may not know any better," Salazar said.