Paypal's dominance could be waning soon.
PayPal Still Leading in Europe, but Wero and Zelle Pose Challenges
PayPal, the dominant player in e-commerce across Europe, continues to grow and take market share, according to a 2023 study by the EHI Retail Institute. Despite this, new payment providers are emerging, posing potential challenges to PayPal's dominance.
One such competitor is Wero, the wallet from the European Payments Initiative (EPI). Launched last year, Wero aims to become a unified, pan-European payment solution, potentially integrating tightly with local banks and merchants. While PayPal still dominates digital wallet usage in many European countries, including Germany and the UK, Wero could pose a future competitive challenge.
The success of Wero bears some resemblance to Zelle, a payment service that reported a transaction volume of over one trillion US dollars in the previous year. Zelle's success in the US may serve as a potential blueprint for Wero in Europe, according to Thomas Walkner of consulting firm Capco. Like Wero, Zelle leverages the power of large banks or banking associations behind it.
However, Zelle's success in the US is largely a domestic phenomenon, driven by the US bank network and instantaneous peer-to-peer payments. Its direct model is not yet replicated in Europe, where payment habits and regulatory environments differ. Therefore, Zelle's success does not directly translate into a threat to PayPal’s European position.
If PayPal were to lose ground in Europe, the primary beneficiaries could include Wero, local European digital wallets and account-to-account (A2A) payment methods, and other global digital wallet competitors like Apple Pay and Google Pay.
The emergence of these new payment providers, however, does not mean that PayPal's position in Europe is under immediate threat. PayPal is growing through expanded services and partnerships, and its presence in Europe is robust, aided by ongoing integrations with local payment providers.
However, there are concerns about the susceptibility of these new payment services to fraud schemes. As the more people use a payment service, the more attractive it becomes to fraudsters, according to Thomas Walkner. Banks are needed to help identify fraudulent payments due to the lack of necessary information in payment services.
One area where Wero may have an advantage over Zelle is in speed. Wero's Instant-SEPA transfer is faster than Zelle's Automated Clearing House (ACH) process. In the US, Zelle surpassed PayPal in P2P transactions, with PayPal users sending only 400 billion US dollars to other individuals, compared to the over 700 billion US dollars sent via Zelle's P2P function.
In conclusion, PayPal's position in Europe is currently resilient and growing, but it is vigilant for competition from a growing European ecosystem around EPI/Wero and entrenched local payment systems. Zelle’s US success is unlikely to impact Europe much due to differing market dynamics.
- The emergence of competitors like Wero, a payment solution from the European Payments Initiative (EPI), and Zelle, which has been successful in the US, could potentially integrate with local banks and merchants in Europe, posing future challenges to PayPal's dominance.
- While Zelle's success in the US may provide a potential blueprint for Wero, its direct model is not yet replicated in Europe due to differences in payment habits and regulatory environments, suggesting that Zelle's success in the US does not directly translate into a threat to PayPal’s European position.
