Venmo to add budgeting, investing tools amid digital wallet competition
PayPal CEO Enrique Lores laid out his plan Wednesday to run the payments company as a stand-alone business for the foreseeable future, telling investors that a deal from Stripe and private-equity firm Advent International valued at more than $50 billion collapsed because the sides remained too far apart on price.
Lores, 61, said in his first public remarks on the strategy since reports of the stalled talks that PayPal’s management had reviewed its own plans against any outside offer. “What we have done is to first look at the strategy that we have, have confidence in the strategy that we have, and use this as a benchmark to compare any other alternatives,” Lores said.
The takeover proposal, reported earlier this summer, valued PayPal at about $60.50 a share. Shares jumped when the offer became public, and several Wall Street analysts described the deal as compelling given PayPal’s recent results and battered stock price. But a deal never materialized. The stock, which had touched above $62, has since dropped back to $53 a share. The Wall Street Journal noted it is always possible deal talks could restart.
Lores, who was previously PayPal’s chair, was thrust into the CEO role in February to the surprise of analysts and some investors. He spent decades at HP and its predecessor, Hewlett-Packard, rising from an engineering role to leading divisions and ultimately designing the company’s breakup.
The standalone strategy hinges on three pillars. Lores plans to slash billions of dollars in costs, offer better rewards and improve the user experience for the legacy PayPal checkout button — whose usage has plateaued since Apple Pay and Google Wallet became the dominant digital wallets — and transform Venmo into what he described as a one-stop money management app similar to financial-services platforms such as SoFi and Chime.
Venmo already lets users buy and trade cryptocurrency, store money in PayPal’s in-house stablecoin PYUSD to earn rewards, and access debit and credit cards. PayPal has said Venmo plans to launch a buy-now-pay-later function in the near future and has three additional product launches planned in the next year, though it has not disclosed details.
Analysts were unmoved. “They trade like a melting ice cube,” Sanjay Sakhrani, an analyst at Keefe, Bruyette & Woods, said. “The investment community is suspect because they just haven’t executed for a long time.” Truist analysts wrote recently that “the path forward for PayPal, either under Stripe’s ownership or as a stand-alone company, we believe will be a bumpy one.”
The competitive landscape has intensified. Cash App, owned by Jack Dorsey’s Block, and trading platform Robinhood have already added banking features in their apps. Revolut, a large digital-banking app in Europe that has garnered praise from JPMorgan Chase CEO Jamie Dimon, is expanding in the U.S., and last week regulators granted conditional approval to its application to become a national bank. Chime said this week it would acquire Stride Bank and its national banking charter, allowing it to make its own loans without a partner. PayPal’s own application for a state charter in Utah, filed in December, remains pending.
Venmo’s large existing user base — which trends younger and more affluent, analysts have said — gives it a potential advantage over newer entrants. Translating that user base into the kind of broader financial relationship that Chime, SoFi, or Robinhood have built remains the open question, and Lores’s compensation package makes the stakes personal.
His targets include a $25 million bonus if PayPal’s stock averages above $68 for 60 days and a potential payout exceeding $60 million if the stock averages $125. The compensation structure, set before the buyout talks were reported, signals the value management viewed as possible if it could deliver on its plans. For now, Lores is betting that PayPal’s standalone path can close the gap with faster-moving rivals.