PayPal is Setting the Pace of Digital Fintech Innovation in 2020

By investing in BNPL, contactless payments, and more, PayPal has emerged as the leader in pandemic-driven financial innovation.

Need to Know

  • PayPal (along with subsidiary Venmo) is leading the fintech charge as it offers services that connect consumers with merchants during the COVID pandemic.
  • The fintech recently rolled out QR code payments at 8,200 CVS locations, debuted its own buy now, pay later program, and rolled out its own Venmo credit card.
  • In a new announcement, The Gap and DoorDash have joined PayPal as its latest merchant partners.
  • PayPal currently has 364 million active users, while Venmo has 65 million users.


Few companies were as well-primed to face the e-commerce challenges of the COVID-19 pandemic as PayPal.

The online payments company has posted two record-breaking quarters on the heels of an eight-month lockdown period that saw 10 years of e-commerce growth in its first three months alone. It’s not just new partnerships either, though PayPal has seen plenty of those during the pandemic, recently signing on The Gap and DoorDash—the largest food delivery service in the U.S.—as new merchants.

Beyond the growing list of new partners, Paypal is taking aim at aging financial infrastructures as its large market share made it the payments facilitator of choice for many consumers, and therefore a hot commodity for merchants now looking to expand their online and contactless payments options. But throughout COVID-19, PayPal has proven itself to be a nimble fintech, offering a number of services such as PPP fund distribution and buy now, pay later (BNPL) financing, that position the company as a strong competitor to traditional banks.

PayPal is now used by a whopping 80% of U.S. retailers. In Q3, PayPal and its subsidiary Venmo reported record-breaking growth of 36% and 61% respectively. The company’s success is not unparalleled in the pandemic—companies such as Amazon and Uber, whose use has also increased during COVID-19, are also reporting substantial growth. But PayPal’s increase in value comes in part from the company leveraging its existing payments infrastructure for pandemic-specific uses, without the need to pivot its business model—as a reliable, established payments processor, PayPal had the market share and reputation to thrive in an ecosystem marked by an increased reliance on e-commerce and online funds management.

PayPal’s first foray into pandemic-specific functionality came in April when it was tapped for the distribution of PPP loans. While giving PayPal the green light to distribute the funds was meant to take the load off traditional banks, it also shed light on how the fintech is well-primed to step in for such banks when their infrastructure simply cannot meet demand.

Dan Schulman, PayPal’s CEO, said at the time that the company was “eager to deploy our capital and expertise to do our part in helping small businesses survive this challenging period;” indeed, PayPal had, in March, waived some merchant fees and deferred some small business loans in an effort to help its entrepreneurial clients survive. But even for individual consumers, PayPal’s capacity to distribute government assistance funding gives it a leg up over traditional banks: with its PayPal Cash Card, users can receive, spend, and withdraw month all within PayPal’s native ecosystem, without the use of a traditional bank account, and even in person.

Unlike traditional banks, which have been forced to quickly update their services since the pandemic, PayPal has been able to focus its resources on strategic new product launches that serve a consumer base that has grown organically since the spring. Key among these has been the company’s launch of its own BNPL function, which allows PayPal users to finance their purchases in six installments.

This finance solution has been a winner during the pandemic, as companies such as Splitit, Klarna, and Afterpay have capitalized on the growing need for financial flexibility due to economic insecurity. Pay in 4, which is part of PayPal’s suite of Pay Later products, is available to consumers who are making purchases between $30 and $600. PayPal supports participating merchants by paying them upfront, letting users take advantage of a modern take on layaway. And, again, the function is built into an interface already used and trusted by both consumers and merchants; unlike companies such as Klarna and Afterpay, which (for now) require separate sign-ins, PayPal’s BNPL option lives in the same place as customers’ debit and credit accounts, a benefit that has proven hugely valuable for the company.

Perhaps the most significant new development for PayPal, during the pandemic, has been its implementation of QR code-enabled payments. Here, the company offers all of its built-in benefits—easy access to funds, a familiar user interface, and payment flexibility—with a new consumer and merchant priority: contactless, in-person payments. While digital wallets like Apple Pay also offer contactless payment, they do not have the seamlessness of PayPal’s trusted, widely-used interface.

PayPal has been able to leapfrog other fintechs as well as big banks with the rollout of QR code payments as the most pandemic-friendly payments processor on the market. And while PayPal has only signed on one major retailer for its QR code payment option—CVS, which announced the partnership in July and rolled out the function earlier this week—all of its Venmo credit cards come QR-enabled, and any business that accepts PayPal payments can create their own QR codes within the company’s dashboard.

As the holiday season approaches, PayPal’s existing offerings and new partnerships see the company well-primed to close out 2020 on a high note. The company has an established relationship with Google Pay and is integrated into the checkout option for Facebook and Instagram’s in-app shopping options. According to a study commissioned earlier this year by the company, 57% of consumers say a merchant’s digital payment offerings affect their decision to shop with that merchant, and many merchants are recognizing that the most efficient way to reach consumers is through PayPal.