Paypal Credit Card Space

Part
01
of three
Part
01

Credit Card Incentives

Overall, in looking at credit card incentives, there are trends towards higher cash back or rewards points, from 1% to 1.5%, as well as mobile self-service to make access to rewards more convenient for customers. The initial rewards bonuses have seen significant changes where miles/points bonuses have fallen by 17.82% but cash-based bonuses have risen by 14.42% in the calendar year of 2017.

Incentives

Issuers are battling to draw more customers to the credit cards that they offer. This has resulted in certain shifts in their incentive programs. Some of these shifts have trended towards making what was offered previously even bigger, and some have been new offerings to entice customers. Seven of these trends are listed below:

1) Higher Reward Points for Cashback

There has been an increased focus on cash-back rewards systems. People love cash. For cash-back cards, overall customer satisfaction is highest. Customers received 1% of their total transactions in cash back from their credit card issuers at one point, however due to bonus reward categories, that has risen to 1.5%. There has been a push towards more simple cash-back rewards. Credit cards with a fixed rewards rate of 1.5% to 2% back on all purchases, provide a level of simplicity that consumers like.

2) CoBranded Rewards Cards

In 2018 there are new ways to redeem your rewards. These rewards are being catered to your lifestyle as credit card issuers are getting more creative. New offerings include a $200 per year Uber credit for American Express Platinum cardholders or 50% off a Spotify Premium subscription offered to Quicksilver customers of Capital One.

The expectation is that reward-partnerships with popular brands will continue in 2018. These brands are loved by card issuers because they are recurring charges that are sticky and are habit forming.

One exciting introduction was branded credit cards for Amazon, Uber and Starbucks, all of whom partnered with credit card issuers. The focus on lifestyle is evident.

3) Travel Rewards

Five-figure travel point initial offers with generous travel perks are not going anywhere for now as issuers create new cards and try to entice new customers. However, the days of 100,000 point sign-up bonuses seem to be at an end after profits for issuers like Chase had their profits eaten into by this bonus.

Still, the redemption of travel rewards points is still the best deal. Travel rewards yield 30% more value than redeeming for merchandise which is the worst redemption option.

4) Mobile Wallets

There has been a reluctance by customers to adopt mobile payments and this is expected to continue into 2018. This is despite the fact that banks and stores are issuing even more mobile wallets. Issuers like Chase Freedom have incentivized their users with 5% cash back when they pay with their mobile wallets in quarter one, 2018. Other issuers like U.S. Bank and Wells Fargo have followed suit with such incentives for utilizing mobile wallets for transactions.

The belief though, by experts, is that retailers who have created their own virtual wallets have a distinct advantage in the mobile payments game.

5) Long-Term Customer Loyalty

For years the focus has been on the short-term customer. Credit card issuers have used big signup bonuses to attract new clients, however this does nothing for the long-term customer. This trend has begun to change and will get even bigger in 2018 as credit card companies will focus on tiered reward systems to reward their long-standing customers. Improved customer service is another strategy to promote loyalty.

6) Bigger Perks for Premium Cards

People always love more perks and those with the higher-rewards credit cards are projected to get even more perks. From spa upgrades to first class treatment as well as travel credits, more miles and other bonuses this is a highly competitive market for credit card issuers. The sky is the limit when it comes to luxury travelers and their premium rewards because they are willing to pay up to $500 in annual fees on their premium cards. Expect this competition to intensify in 2018.

7) Hotel & Dining Rewards

The hotel loyalty programs with the highest satisfaction are ones that let their members redeem rewards for dining, product purchases and special events. A great example is Hilton's Honors program that introduced several new features like points pooling, booking accommodations with a combination of cash and points and even allowing members to pay for their Amazon purchases with their rewards points.

As more Americans are dining out than in past years, this has caused a trend where credit card issuers are offering higher rewards for dining and food-focused cards.

Conclusion

To wrap up, there is a continued trend towards higher payouts in rewards points or cash back as this jumped from 1% to 1.5% of total transactions. Mobile self-service is increasing by issuers to make it more convenient for customers to access their points as well as know what deals are available where. Also, everyone loves more cash and issuers are taking notice where cash-based bonuses have increased by 14% while miles/points bonuses have decreased by 17%.
Part
02
of three
Part
02

Paypal Incentives

An overview of recent trends with PayPal credit in terms of incentives- rewards, cash back, and points has been completed. Our research found the addition of a 2% cash back MasterCard offering, which appeared in August 2017. This addition augments the existing rewards-based MasterCard and the PayPal Credit line.

Background

Our research showed that, although PayPal’s decision to offer credit cards was unpopular with its investors at the time, PayPal has benefited from the decision. Transactions per account increased 13% in 2016 and 8% in 2017, with little impact to PayPal’s profit margin. For the purposes of this brief, we researched PayPal credit lines for personal use, rather than corporate use. The PayPal Prepaid MasterCard was not researched because it is not a credit line. PayPal requires applicants for their credit cards to have an existing PayPal account.

FINDINGS

PayPal offers three personal credit lines:

-The PayPal Cash Back MasterCard is a new offering, introduced in August 2017.
-No annual fee
-2% cash back on all purchases made with the card, regardless of type
-Cash rewards are redeemed directly into the cardholder’s PayPal account balance

-3 points per dollar spent for gas and restaurant purchases made with the card
-2 points per dollar spent on eBay and PayPal purchases made with the card
-1 point per dollar spent on all other purchases made with the card
-800 reward points can be redeemed for gift cards from selected merchants
-3,000 points can be redeemed directly for merchandise from selected merchants
-6,000 points can be redeemed for $50 added to the cardholder’s PayPal account balance
-15,000 points can be redeemed for a travel voucher for select airlines, hotels, and car rentals
-In addition to the benefits above, the PayPal MasterCard credit lines offer double the manufacturer’s warranty (up to one year) on purchases made with the card, 60-day price protection on card purchases, identity theft resolution assistance on card purchases, and EMV security chip technology embedded in the card.

PayPal Credit is a credit line extended (on approved credit) to PayPal customers. Unlike the credit card offerings, PayPal Credit is not a revolving credit card, rather it is only for purchases made through PayPal, and the credit extended is repaid over a set amount of time (up to 36 months) specified by the purchaser.
-No annual fee
-No payments/no interest on purchases over $99 if the balance is paid in full within 6 months
-Approval process is a matter of providing a birth date and Social Security number

Trends

While our research found no specific changes to incentives being announced in the near future, a June 2017 presentation by PayPal CEO Daniel Schulman, echoing a May 2017 presentation by CFO John Rainey offered positive sentiments toward expansion of the credit part of PayPal's business, with Schulman indicating that PayPal Credit users spend twice as much as non-users, and that the company was willing to forgo profits in its credit business to fuel growth in other areas.

PayPay also reached an agreement with Google in July 2017 to incorporate PayPal into Android Pay and the Chrome browser, despite the two entities being considered rivals in the industry. According to CEO Schulman, Google doesn't consider payment processing to be one of its core business functions, and the move boosts PayPal's presence on mobile devices, where 32% of its transactions took place in Q1 of 2017, up 6% year-over-year.

Conclusion

To wrap up, based on our research, PayPal has no immediate plans to modify incentives for the credit lines it offers, beyond the August 2017 introduction of a 2% cash back MasterCard. Rather, the company has indicated a strong bias toward entrenching its current credit offerings and expanding its services within the mobile market.
Part
03
of three
Part
03

PayPal Brand News

Overview
In the past six months, PayPal has received a significant amount of news coverage in the US. Some coverage about PayPal was related to new developments that PayPal has recently launched or plans to launch in the near future that will have an impact on customers. Additionally, other recent news about PayPal included details on the number and types of retailers who plan to accept PayPal. A deep dive into relevant recent news on PayPal from a customer-facing perspective is below.

1. Nine months after announcement, PayPal support rolling out for Samsung Pay
The website Android Police published an article detailing how Samsung Pay has begun to accept PayPal as a form of payment. The announcement that PayPal would be a new option for Samsung Pay customers was made in July 2017 and now reports of customers successfully adding PayPal accounts to Samsung Pay have been noted.

2. Here's Why PayPal will Start Accepting Litecoin (LTC) in 2018
In March 2018 USA Commerce reported that PayPal will undoubtedly embrace cryptocurrency this year. Citing the current popularity of cryptocurrency (with the recent dedication an entire Last Week Tonight show with John Oliver on the subject), the article reported that PayPal filed for a patent related to a cryptocurrenty fund transfer system that would make Bitcoin (BTC) transactions fast and anonymous (this technology may also work for other crypto coins, as well).

The article also highlighted that, though BitCoin is the most valuable and highly-traded coin on earth, PayPal would likely choose to add Litecoin due to its speed and cost, and its presence on the biggest exchange in the world. USA Commerce also suggested that PayPal would likely add more than one crypto coin to their payment gateway, meaning than an addition of Litecoin would not be the only form of cryptocurrency that would be a new option for PayPal users.

A recent article on tamebay.com cited insights from the Boston Retailer Partners that suggest that Apple Pay is the top choice in retail digital payments, with 36% of North American retailers accepting it as a payment option (more than any other digital payment system). The widespread adoption of Apple Pay may have to do with its ease of use, allowing users to pay with their watches.

The research showed that roughly one third of North American retailers already accept PayPal, and within the next year, more than half of all North American retailers plan to accept it. However, Apple Pay's acceptance rate is predicted to approach 60% in 2018.

4. New Freelancers: How to Make Money on Upwork
The website nerdwallet recently published a guide for new freelancers on Upwork, a global freelancing platform where businesses and independent professionals connect and collaborate from all over the world. The article cites payment via PayPal as a benefit, making it easier for freelancers to get paid than if they were working without membership in the Upwork community.

5. BofA lets customers link cards to PayPal accounts from mobile app
Finextra.com recently published an article that detailed how Bank of America customers can now add credit and debit cards to their PayPal accounts directly from the Bank of America mobile app. In addition to this news, the article also discussed PayPal's additional ties with other big US banks, including similar deals with Citibank and JPMorgan Chase. PayPal recently became the latest quarterly category for Chase Freedom cardholders, who will now earn a five percent cashback reward on their PayPal spending.

Finextra.com also published an article recently about the updates being made to PayPal's two new mobile point of sale (mPOS) devices, one of which accepts card swipe transactions, and the other of which accepts chip and tap payments. These mPOS devices are aimed at helping mobile small businesses, allowing users to accept payments from nearly anywhere with speed and security.

Both mPOS devices are smaller than a deck of cards for portability ease, and they connect to mobile devices via Bluetooth. Each device contains a lithium ion battery. PayPal is charging $24.99 for the swipe reader and $59.99 for the chip and tap option, which accepts contactless card payments as well as Google Pay, Apple Pay, and Samsung Pay.

7. BofA Merrill Lynch rolls out B2C e-mail payments with PayPal
In another article published by Finextra.com, news of Bank of America Merrill Lynch's partnership with PayPal to enable business clients to make cross-border payments in local currencies via email is detailed. Payments are initiated through BofA Merrill Lynch's Global Digital Disbursements and can be made from the US to PayPal account holders in Mexico, France, Germany, Italy, the UK, and the Philippines.

8. Invoice2go releases mPOS device in association with PayPal Here
Finextra.com shared news of Invoice2go's newly launched mobile point of sale payment feature with PayPal Here. Invoice2go is the simplest way for business owners and freelancers to track work and get paid, and this new mPOS device will enable even the smallest businesses to be paid in person from nearly anywhere.

What sets Invoice2go's mPOS apart from others is that it is designed to fit with how the most mobile of businesses work. Plumbers, contractors, florists, and dog walkers alike will now be able to get paid instantly on the spot, whether they are at a job site, in their home office, or on their customer's front porch. PayPal Here's support of Invoice2go's mPOS means that these businesses can accept swipe, insert, or tap and go payments wherever they are. This service will allow Invoice2go to appeal to an even wider customer base and increase their customer retention.

9. Mobile and P2P Payments Soar to New Heights
This article featured on PayPal's website documents the continued rise of mobile payments; in fact, PayPal processed $155 billion in mobile payments in 2017, which was a 55% increase over 2016. Consumers are spending more time on their mobile devices, which has presented exceptional new opportunities for PayPal, as one of the largest mobile payment platforms. PayPal plans to continue to innovate in order to make shopping and managing money on mobile phones easier for customers.

PayPal is also making it easier for customers to access their money, adding the ability for PayPal customers in the US to instantly transfer money to their bank accounts via debit cards linked to their bank accounts.

10. PayPal Here User Reviews and Pricing
fitsmallbusiness.com recently shared an article detailing user reviews of PayPal Here, sharing that positive reviews of PayPal Here indicate that it gives different options, is easy to use, and that payments are reflected in their accounts quickly. Conversely, many of the negative reviews cited issues with funds being held when transactions needed a certain amount, and that customer service is at times unable to offer a clear explanation or solution to problems.

The overall experience with PayPal Here was reported to be good, with a fair ease of use, good pricing, and bad customer service.

Conclusion
In the past six months there has been a significant amount of news regarding PayPal and its customer offerings. PayPal's new mobile point of sale system, its new partnerships with large banks, and its upcoming launch of new cryptocurrency options will certainly provide some immediate or future benefits to many PayPal customers in the US and, therefore, would likely be of interest to them.


Sources
Sources