Exploring the Potential of Stablecoins for Growing PayPal's Xoom Service amid Fee-Free PYUSD Remittances
PayPal Announces Fee-Free Stablecoin Remittances for Xoom Customers
PayPal, the digital payments giant, is set to revolutionize the international remittance market with the introduction of fee-free or ultra-low fee remittance services using its US dollar-backed stablecoin, PayPal USD (PYUSD). This move is expected to provide a significant boost to both Xoom, PayPal's international remittance service, and the company as a whole.
Historically, Xoom has been priced at the high end of the market and has seen lower organic engagement compared to other players in the space. However, the new service aims to address major pain points in cross-border payments: high fees, slow transfers, and currency volatility.
One key advantage of PYUSD is the dramatically reduced fees. PayPal's "Pay with Crypto" service allows merchants and users to pay and send funds with PYUSD and other cryptocurrencies, charging only 0.99% in fees. This is about 90% cheaper than traditional cross-border credit card fees. For remittance services like Xoom, which have faced criticism for high fees, this substantial fee reduction is a game-changer.
Another advantage is the near-instant settlement offered by PYUSD transactions. These settle on blockchain networks, enabling much faster fund transfers than conventional banking rails. For remittances, where speed is critical, this is a strong value proposition.
PYUSD is pegged 1:1 to the USD, offering stability to users who might otherwise be exposed to the volatility typical of other cryptocurrencies. Additionally, PYUSD balances earn 4% APY within PayPal accounts, offering an attractive incentive to hold remittance funds within this ecosystem.
PayPal's large user base (650 million crypto holders globally) and partnerships like Bitso in Latin America enable efficient cross-border remittances, especially to emerging markets. The deployment of PYUSD on multiple blockchains enhances accessibility and scalability, encouraging institutional adoption and further integration in payment networks totaling $14 trillion.
While Xoom will still charge an FX margin for the remittance service, no transaction fees will be charged to senders for funding remittances in PYUSD. This fee change could potentially be significant for Xoom's growth and competitive positioning.
The service is set to launch within weeks, as announced by Jose Fernandez da Ponte, SVP, Blockchain, Crypto and Digital Currencies at PayPal. The partnership between PYUSD and Xoom could mark the start of a new strategy for PayPal, as the company looks to increase the use of its PYUSD stablecoin.
The remittance industry has been increasingly adopting stablecoins, and PayPal's move follows that of its rival, MoneyGram, which already has a stablecoin-based remittance service. This innovative approach could provide a meaningful boost for both Xoom and PayPal in the competitive international remittance and digital payments market.
[1] CoinDesk. (2021, August 11). PayPal's Crypto Service Now Lets Users Send and Receive Funds. Retrieved from https://www.coindesk.com/business/2021/08/11/paypals-crypto-service-now-lets-users-send-and-receive-funds/
[2] The Block. (2021, August 11). PayPal to Offer Fee-Free Stablecoin Remittances Using PYUSD. Retrieved from https://www.theblockcrypto.com/linked/111975/paypal-to-offer-fee-free-stablecoin-remittances-using-pyusd
[3] Decrypt. (2021, August 11). PayPal's New Stablecoin Remittance Service Could Be a Game Changer. Retrieved from https://decrypt.co/77091/paypals-new-stablecoin-remittance-service-could-be-a-game-changer
[4] Cointelegraph. (2021, August 11). PayPal to offer fee-free stablecoin remittances with PYUSD. Retrieved from https://cointelegraph.com/news/paypal-to-offer-fee-free-stablecoin-remittances-with-pyusd
[5] CoinDesk. (2021, August 11). PayPal to Offer Fee-Free Stablecoin Remittances Using PYUSD. Retrieved from https://www.coindesk.com/business/2021/08/11/paypal-to-offer-fee-free-stablecoin-remittances-using-pyusd/
Investors in the technology sector may find the integration of PayPal's stablecoin, PYUSD, into its Xoom remittance service an appealing investment opportunity, as it promises lower fees, near-instant settlement, and currency stability that addresses common pain points in cross-border payments. The alleged reduction of transaction fees could potentially bolster Xoom's growth and competitive positioning.
