In a bid to expand in the remittances space, PayPal’s overseas transfer service, Xoom, announced it is slashing fees for those funding their transfers with the provider’s stablecoin, PYUSD. As the first major US financial company to launch its own USD-backed stablecoin in August 2023, PayPal is now working to incorporate the use of PYUSD into its platforms such as Venmo or Xoom in order to gain a foothold in the growing crypto space.
GlobalData’s 2023 Financial Services Consumer Survey shows respondents have little interest currently (10% on average) in purchasing cryptocurrencies for the purpose of sending funds to friends and family from Xoom’s outbound markets—that is, the US, the UK, Canada, and Europe. Nevertheless, in an industry with fees of 2% on average, the ability to avoid such fees can prove to be a successful incentive for spreading the use of PayPal’s stablecoin for transfers.
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As most of PayPal’s revenue comes from processing online transactions, bringing back the Xoom remittance business branch that was up for sale just a year ago is part of a bigger plan from PayPal. With the majority of ecommerce transactions projected to be settled on open blockchain ledgers within the medium/long term, middleman-type providers such as PayPal are at major risk of losing their main sources of income collected from merchant fees.
GlobalData Online Consumer Payments Analytics 2023
GlobalData’s Online Consumer Payments Analytics 2023 reveals PayPal as the third-most popular payment tool for online checkouts in Western markets, only after credit and debit cards. As the ecommerce industry is forecast to surpass $4trn in the US, the UK, Canada, and Europe combined by 2027, as per GlobalData’s E-Commerce Analytics, it is unsurprising that a single provider of this calibre would take strategic actions to avoid falling behind.
Although PayPal is currently unlikely to be earning a notable margin on either its Xoom or PYUSD operations, the company is utilising one of its long-acquired and forgotten business ventures as a tool to spread its own stablecoin, aiming to position itself as a leader not only in the current payments landscape, but in that of the future as well.
Blandina Hanna Szalay is an analyst in banking & payments at GlobalData
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