Brief:

• PayPal, the online payment service with 200 million users, wants to diversify into other businesses with a combination of partnerships and investments, according to Bank Innovation. The company's goal is to be "an everyday part of our customers' lives," PayPal CFO John Rainey said at a Credit Suisse conference with investors in Arizona. Bank Innovation says this signals that the online payment company may want to be more like Chinese-based Alipay.
• As an example of branching out, Rainey cited PayPal’s partnership with Acorns, a mobile app that invests people’s spare change by rounding up every purchase to the nearest dollar. In 2015, PayPal bought out Xoom for $890 million to expand into global digital money transfers.
• PayPal also sees higher growth ahead for its mobile app Venmo, which lets users make peer-to-peer payments after connecting the app to a bank account. Rainey said that while 50% to 70% of shoppers start researching a purchase using a smartphone or table, mobile devices have the lowest rate of conversion to a final sale.

Insight:

PayPal is smartly considering new ways its business can expand through value-added services for consumers, especially since payment services generally see low margins in the commoditized space. PayPal has certain advantages such as its sizeable user base of 200 million people and 17 million merchants that could be monetized with additional services for both sides.

But PayPal's user base appears quaint compared to the 520 million customers of Alipay, which is seeking to expand beyond its home base in China. Alipay's broader ambition is to become a "global lifestyle super app" that helps people to shop anywhere, book travel, make reservations, hail a taxi and manage investments in addition to its core functions of transferring money to friends and splitting restaurant bills.

PayPal emerged from its spinoff from online bidding site eBay with a healthy balance sheet and no debt, CFO Rainey pointed out. That not only makes PayPal an inviting takeover candidate, but it also enables the company to take on debt to make more acquisitions. Last year, investors speculated that MasterCard would bid for PayPal, but such a deal would mean an end to PayPal's relationships with Visa and American Express. This year, PayPal is seen as a possible acquirer of businesses such as Square, Stripe, Adyen or Klarn to expand in the U.S. and internationally. If PayPal can help brands lift mobile conversion rates, it has plenty of potential to expand beyond payments as competitors begin to trickle into the U.S. market.