NEW YORK — PayPal, the company that helped define online checkout, is grappling with a stark reality: its once-unassailable position is under siege. Nearly three decades after its inception, the iconic payments firm is experiencing a critical slowdown in its core business, prompting blunt warnings from new management about the need for “significant changes.” The company’s stock has reflected these investor concerns, plummeting nearly 40% in the past 12 months and roughly 80% over the last five years.
Competitors Tighten the Squeeze
Once a dominant force, PayPal has seen its market share steadily eroded by a wave of new and established competitors. Among the most significant challengers are Apple with its Apple Pay service, the burgeoning buy now, pay later (BNPL) sector represented by companies like Affirm and Klarna, and peer-to-peer money transfer platforms such as Cash App and Zelle. This intensified competition, particularly over the last five years, has directly impacted PayPal’s growth trajectory.
The primary concern for investors is not PayPal’s profitability, though the company did forecast a dip in 2026 profits. Instead, the worry centers on PayPal’s ability to grow and maintain its market presence in an increasingly crowded and dynamic payments landscape. In its first-quarter earnings report, PayPal revealed that its branded checkout business, historically its most profitable segment, grew by a mere 2%. While the company cited a slowdown in its European division and reduced discretionary spending, this sluggish growth in a rapidly expanding industry alarmed shareholders, leading to an immediate drop in its stock price.
Leadership Shake-up and Strategic Shift
The mounting pressures have precipitated significant leadership changes. In February, CEO Alex Chriss was ousted and replaced by Enrique Lores, a former president and CEO of HP Inc. and a member of PayPal’s board. Lores has wasted no time in signaling a strategic overhaul, announcing a cost-cutting plan that includes reorganizing the company into three distinct divisions and a greater reliance on artificial intelligence. Lores has indicated that a more detailed update on the company’s turnaround strategy will be provided to investors in the coming months.
Apple Pay’s Ascendancy
A major disruptor to PayPal’s dominance has been Apple Pay. Launched in 2014, Apple Pay allows Apple device users to store virtual credit and debit cards, facilitating seamless online payments. Furthermore, its integration of tap-to-pay technology into iPhones and the Apple Watch has revolutionized in-person retail transactions. Analysts note that as consumers increasingly store their payment information directly on their devices, the traditional PayPal checkout button on merchant websites has become less indispensable. This shift has contributed to a gradual drift away from PayPal as a default payment method.
Data from UBS analysts highlights this trend: in 2019, PayPal held approximately 9% of the U.S. and global e-commerce market, with Apple Pay at 3%. By 2025, Apple Pay had surpassed PayPal as the leading checkout option, with projections indicating continued market share growth, especially as Apple expands Apple Pay access to non-iOS users.
The Rise of Buy Now, Pay Later
The burgeoning popularity of buy now, pay later services, such as those offered by Klarna and Affirm, presents another formidable challenge. While PayPal has introduced its own BNPL offerings, including its pay-in-four plan and longer-term monthly payment options, it is perceived to be lagging behind key competitors. Notably, Affirm was founded by Max Levchin, one of PayPal’s original founders, underscoring the competitive talent pool in the payments space.
Sanjay Sakhrani, an analyst covering credit cards and payment methods at Keefe Bruyette & Woods, commented on PayPal’s evolving challenges, stating, “PayPal has had a lot of trouble evolving from being just a way to pay on your desktop computer.”
Looking ahead, investors remain watchful of the branded checkout business’s performance. Speculation is rife on Wall Street regarding potential spin-offs of PayPal’s other ventures, such as Venmo or Braintree, especially given Lores’ prior experience in splitting HP into separate entities. Earlier this year, unconfirmed reports of Stripe’s interest in acquiring parts or all of PayPal briefly boosted the company’s stock, underscoring the ongoing strategic uncertainty and potential for significant corporate restructuring.
