Paypal does not really protect the merchant that well. Sometimes, I read articles in order to improve and grow my shop. It's enormously important that neither of these companies has any long-term debt. According to PayPal… Shopify earns its revenue through two segments: subscription solutions and merchant solutions. PayPal … That said, PayPal's strong free cash flows give it the edge here. Over the trailing 12 months, the company posted $2.94 in EPS, giving the stock a price-to-earnings (P/E) ratio of 36.7. In Q3, merchant solutions grew 50% to $225 million. If PayPal wasn't as safe or safer to use than a … That's a smart long-term move, but it also makes the stock expensive. The highest they can go is 2.9% plus $0.30 per transaction, while the lowest rate is 2.4% plus $0.30. Next up on our list is Cash App, built by Square, which is perhaps best known for its point … But unlike some of the other online payment systems, Google Pay can be used to transfer money and to make purchases. However, if PayPal's results had not been affected by unrealized losses in its strategic investments, its EPS would have grown by a much more robust 31%. Returns as of 03/06/2021. Figures on the strength of this moat are hard to come by -- and if Shopify only benefited from the network effect, my nod would go to PayPal. PayPal Standard is one of the most popular gateways for merchants, as there are no setup fees, termination fees, or merchant accounts needed to get set up – all you need is a PayPal Business account.PayPal Standard is available in 190 countries, so almost any merchant can use it.. Founded in 1993 by brothers Tom and David Gardner, The Motley Fool helps millions of people attain financial freedom through our website, podcasts, books, newspaper column, radio show, and premium investing services. Let's take a closer look to see if we can determine which of these growth stocks is the better investment. Shop and Pay Online With Your PayPal Account . 10 Reasons to Buy PayPal Stock, Copyright, Trademark and Patent Information. Founded in 1993 by brothers Tom and David Gardner, The Motley Fool helps millions of people attain financial freedom through our website, podcasts, books, newspaper column, radio show, and premium investing services. Over the long run, companies with the widest moat -- or the strongest advantages -- are able to create incredible wealth for their shareholders. Stock Advisor launched in February of 2002. Payment encryption. Shopify Payments Vs PayPal. Transactions via PayPal Standard are processed on PayPal… They can buy back their own shares, underprice the competition to grab market share, or simply acquire their rivals. He also mixes in risk-management strategies he's learned from Nassim Nicholas Taleb. Two of the companies best positioned to benefit from that trend are PayPal and Shopify. In PayPal's third quarter, revenue rose to $4.38 billion, a 19% increase year over year, while adjusted earnings per share (EPS) grew 5% to $0.61. We’re motley! Recently, I have read an … PayPal, on the other hand, could get more aggressive when it comes to the competition. Free cash flow presented on a trailing-12-month basis. PayPal Holdings Inc.(Nasdaq:PYPL): Digital payments were already on the rise, but the pandemic accelerated growth. I have a shop and sell different kinds of handmade products like leather bags and sandals. More money will be spent by U.S. consumers making online purchases this year than ever before. You can also use PayPal to pay in person with QR codes. For that reason, I believe PayPal is a better investment today. The company's platform allows smaller merchants to maintain their identity without getting lost in a sea of other sellers in large online marketplaces and to focus on their core competency without getting bogged down handling the tedious tasks behind the scenes. Shopping online shouldn't cost you peace of mind. It's a virtuous cycle, and the same dynamics play f… This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. With the increased use of e-commerce platforms this holiday season and consequent increase in digital payments, both PayPal … Stock Advisor launched in February of 2002. Here again we run into the same problem we had before: Shopify is purposely spending most of what it brings in to grab market share. Paypal also sides with the customer and will take money back from the merchant much faster than the actual credit card company would in a dispute. We’re motley! Shopify makes up 6% of my family's real-life holdings, while I own no PayPal at all. Share your PayPal.Me page link with friends and family; splitting a bill, chipping in for a present, or reimbursing a friend has never been easier. Market data powered by FactSet and Web Financial Group. Between the two, which is a better buy today? Data source: Yahoo! For your freelance activity Whether you design websites or … This will give me motivation to consider adding shares in the future, which is something I believe you should do as well. PayPal's key moat is the network effect: As more consumers use the payment system, more merchants are likely to accept payments through PayPal. PayPal, on the other hand… If you’re shopping between two currencies, you’ll have to pay … In Q3, its gross merchandise volume (GMV) -- the total amount of goods sold across its merchant network -- soared 48% to $14.8 billion. However, if you are just looking for an online payment … If you don’t have coding expertise or the funds to hire someone who does, you’re probably looking at Google Checkout*, PayPal … Unlike a credit card, PayPal lets you store your chosen payment details in a secure account. Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer. How would these companies be affected if a financial downturn hit tomorrow? I like to consult a number of different metrics to get a holistic picture of how much I'm really paying when I buy shares of a company. And as more merchants accept payments through PayPal, consumers are incentivized to use it. 3 Unstoppable Stocks Near All-Time Highs That Are Still Buys, Copyright, Trademark and Patent Information. When it’s done, the subsequent payouts are scheduled for every 3 business days. Cash includes long and short-term investments. While Shopify is purposely spending a little bit more than it takes in to continue grabbing market share, a downturn would cause them to hit the brakes. While almost all stocks will fall in such a downturn, the businesses themselves can actually grow stronger if they have lots of dry powder lying around. Finally, we have what I consider the most important variable: a company's moat. Shopify, on the other hand, also benefits from the network effect, but of a different variety. You can shop and pay online without using a credit card if you have a PayPal account. He tends to follow the investment strategies of Fool co-founder David Gardner, looking for the most innovative companies driving positive change for the future. Finance. Adobe Analytics, which analyzes data from 80 of the top 100 U.S. online retailers, estimates that $7.5 billion was spent online this Black Friday, an increase of 20.5% year over year. You can then make payments through PayPal when you shop with a store that accepts it. Those tools attract even more merchants, setting up the same virtuous cycle. coronavirus cases are increasing rapidly, people are spending more time at home and continuing to make transactions remotely. Data source: Yahoo! While PayPal's shares aren't exactly what I call "cheap," they are definitely more favorably priced than Shopify's. While Amazon.com is surely the 800-pound gorilla in the room, others have benefited as well. Skrill is one of the best-known PayPal alternatives. Finance, E*Trade. In the third quarter of 2019, domestic e-commerce sales rose to $154.5 billion, a 16.9% increase year over year, while total U.S. retail sales only grew 4% over the same time frame, according to the U.S. Census Bureau. You’ll still have to pay the additional 2.9% credit and debit card payment fee if you don’t use your PayPal balance or checking account to pay. PayPal now has 295 million active accounts, including over 23 million merchants, creating a real network effect, meaning that the more users that join PayPal's platform, the more valuable it … Image source: Getty Images. One of the best things about Google Pay … Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer. Investors who have focused on the future of retail -- dominated by the concept of e-commerce -- have been huge winners over the past decade. Once a small business gets all of its back-office functions on a single interface, it would be costly -- in terms of money, downtime, headaches, and retraining of staff -- to migrate to a new platform. Cumulative Growth of a $10,000 Investment in Stock Advisor, Better Buy: Shopify (SHOP) vs. PayPal (PYPL) @themotleyfool #stocks $PYPL $SHOP, plus the ability to catch small companies before they hit it big, Here's Why Many Bitcoin Stocks Are Flying High Today, How PayPal Is Growing Its Digital Payments Business, 3 Growth Stocks to Buy and Hold for the Next 10 Years, PayPal's Billion-User Aspiration Is Now Within Its Sights, Got $1,000? Consumers love this feature because it allows them to speedily complete purchases without the need to hand over their payment and personal identification information to a host of merchant websites. Shopify's recently announced secondary offering will also increase its cash position to over $2 billion. A new window or page will appear, prompting you to … Since. E-commerce continues to grow much faster than total retail sales. Users can complete future online checkouts with just "one touch.". Similarly, if you own a website and most of your customers prefer paying for your products via PayPal as opposed to Payoneer, you will definitely opt for PayPal. To send money anywhere except the US, Canada a European country you’ll pay $4.99. ... you'll pay a fixed rate of 2.7% the transaction amount. Should you go with PayPal Personal Account or a PayPal Business Account? If your eligible PayPal purchase doesn’t arrive or is significantly different to the seller’s description, you have Buyer Protection. Shopify and PayPal might be the two most dynamic and growing companies poised to benefit from the rise of e-commerce in the years ahead, and both have long runways for growth. The payment service is also prime for online shopping and has a wider range of products … Here is how to tell which is best for you. Send money securely Across the table or around the globe, we make it simple to transfer money to anyone who uses PayPal… PayPal says there are regular updates to its systems to help block external threats. Cash App. Google vs. PayPal vs. Amazon Which Online Payment Solution is Right for You? PayPal has been around since 1998 when it emerged as a popular way to pay for purchases on eBay. One of the best ways to evaluate that question is to check on a company's financial fortitude: current levels of cash, debt, and free cash flow. The company's One Touch platform enables consumers to register a device, such as a smartphone or tablet, and allows them to stay logged into their PayPal account, saving their payment and shipping preferences. This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. PayPal now has 295 million active accounts, including over 23 million merchants, creating a real network effect, meaning that the more users that join PayPal's platform, the more valuable it becomes. PayPal, Venmo and Zelle: Perfect for purchases. Using PayPal for online shopping. But we can break the idea down into three parts, and get a better idea for which stock we're more comfortable putting our money behind. Subscription solutions is the higher margin of the two and consists of the subscription fees merchants pay every month for access to Shopify's platform. In the US, for instance, it’s 2.9% of the US-based … Buy from millions of online stores without sharing your financial information. P/E presented using non-GAAP earning when applicable. Google Pay has an additional benefit of allowing you to make purchases online and in stores. Venmo vs. PayPal: What's the Difference? Brian Stoffel has been a Fool since 2008, and a financial journalist for The Motley Fool since 2010. That being said, PayPal is still growing revenue at a double-digit rate with a proven and profitable business model and a much cheaper valuation. To do so, you’ll choose the PayPal option at checkout. The COVID-19 pandemic has already dramatically reshaped how Americans shop, with e-commerce expected to grow 20% in 2020 as a greater proportion of users shift […] In the ‘buy now, pay … Shopify only releases its monthly billings retention rate annually, but it has been above 100% for its entire life as a public company. The more merchants that accept PayPal, the more consumers will be incentivized to join. Currency conversion fees. And as more merchants accept payments through PayPal, consumers are incentivized to use it. Those stores must accept Google Pay as payment, however, and not all businesses do. In Q3 2019, 172 million consumers and 13.8 million merchant PayPal account holders had registered with One Touch. The major area where Skrill touts its … Keeping in mind that PayPal is valued at over seven times the size of Shopify, here's how the two stack up. So, there you have it: While I think Shopify's moat is stronger than PayPal's, I can't deny that the latter's war chest and valuation make it a better buy at today's prices. But many still ask, is PayPal safe? In the third quarter of 2019, this segment grew to $165.6 million, which represented a 37% increase year over year. N/A = Not applicable due to negative free cash flow. Skrill. Shopify enables small and medium-sized businesses to sell merchandise across multiple channels (e.g., social media sites, online marketplaces, proprietary websites, and even brick-and-mortar retail locations) with a single, integrated back-office solutions package that includes analytics, marketing, payments, and shipping. Every payment made through PayPal … That, plus the ability to catch small companies before they hit it big -- and rake in more revenue as those merchants grow -- gives Shopify the edge here. Pros. Over the long run, companies with the widest moat -- or the strongest advantages -- are able to create incredible wealth for their shareholders. Two of the best companies for investors to take advantage of the growing e-commerce trend are Shopify (NYSE:SHOP) and PayPal (NASDAQ:PYPL). He is most familiar with the fintech and payments industry and devotes much of his writing to covering these two sectors. Shopify provides … Merchant solutions consists of the extra services sellers can add to their Shopify subscriptions, including shipping, payment processing, and securing working capital. Right now, there are over 500,000 merchants using Shopify for an e-commerce presence. You want people to pay you through your website, but how do you do it? Google Pay lets you link your PayPal account on Android devices running Android 4.4 or later. Over the past two years, for instance, e-commerce platform leader Shopify (NYSE:SHOP) and alternative-payment leader PayPal (NASDAQ:PYPL) have both seen their shares more than double. This is a trend that will only keep growing as merchants continue to augment their logistics infrastructure to ensure they maintain a robust online presence. Next, we have a variable that's very difficult to pin down: valuation. At the same time, total payments volume jumped 24% to $143 billion. Shopify Payments vs Shop Pay If you’re familiar with Shopify as an ecommerce platform, then you’ll know that Shop Pay isn’t the only checkout option the company can offer. Right now, that network effect is on fire: Total active accounts were up 15% last quarter to 254 million. As an economic crimes detective, Matthew focuses on helping others avoid becoming victims of fraud and scams. In essence, you only pay the card processing fees, whose rates are based on your specific Shopify plan. It's a virtuous cycle, and the same dynamics play for some of PayPal's subsidiaries, like Venmo. PayPal's key moat is the network effect: As more consumers use the payment system, more merchants are likely to accept payments through PayPal. But Shopify has another major advantage: high switching costs. Returns as of 03/06/2021. Finally, we have what I consider the most important variable: a company's moat. Paypal Home. Merchants love the feature because sales conversion rates are much higher with customers who use PayPal than other forms of payment methods. It’s the merchant that pays the interchange fee, which is typically 1% to 3% of the purchase price plus a flat fee. The company is still not profitable and shares trade at a price-to-sales (P/S) ratio over 25. While you can use both Shopify Payments and PayPal, the transaction fees for the latter are somewhat different. As more consumers join, the more merchants will see the need to accept PayPal as a payment method at their checkout. That's not a question anyone can answer with 100% certainty. You’ve probably heard of PayPal, but not everyone … PayPal Purchase Protection 1 helps you shop with confidence. See how to shop with PayPal. The company's offerings have obviously resonated with its customers, as Shopify now has over one million merchants across its platform and, incredibly, captured 4.7% of the U.S. market share in e-commerce sales in 2018. Over the years, I am sure that Paypal … Provide your PayPal account log-in credentials. Shopify is increasing revenue much faster than PayPal and has a much smaller market cap, giving it more room to grow. While PayPal also offers payment processing solutions to merchants, it generates the bulk of its revenue by making e-commerce easier for consumers. Hello, all Etsy sellers! Did the Pandemic Permanently Shift Consumer Habits Towards Online Buying? Cumulative Growth of a $10,000 Investment in Stock Advisor, Better Buy: Shopify vs. PayPal @themotleyfool #stocks $SHOP $PYPL. This rapid growth and large total addressable market certainly don't come cheap. Market data powered by FactSet and Web Financial Group. That sheer size attracts third-party app developers to make tools on Shopify's platform. For me, this is a bit of a surprise.