paypal Flashcards
Fintech:
includes all recent tech companies that emerged because of the advances of technology, internet
what served as a catalyst for growth in e commerce and digital payments and services
covid
technological (external environment )
1) advancements in tech, use of social media to determine credit wortness and can then target these customers by learning their data on social media, opens more doors → ethical consideration (could take advantage of having data on consumers)
2) Tech for fraud and risk management→ 57% of customers are more likely to checkout if they see a paypal checkout option
3) Allows processing time of cheques to be much shorter due to tech
4) competitive advantage: data and insights→ can take the payment transactions and identify behavioural, purchasing patterns
5) Have to be aware of our surroundings
Political/ legal
lot of rules in the financial market, they deal with confidential transactions, heavily regulated , have to comply with strict regulations, fraud , anti fraud measures and could be very costly → puts limitations and creates costs bc if they dont comply they get fined, different regulations in many different countries
Economic
recession of 2008→ banks faced new regulations, many closed, many fintech companies used the opportunity of these banks closing ( banks gave out too many mortgages) branches of banks were closed, the rules of mortgages became more strict, the economy has not recovered since then
Sociocultural and demographic
Underbanked and unbanked → can target this as a new potential market , can get opportunities
redlining → people of cokour and women couldnt get mortgages to buy houses if they lived in white neighbourhoods . they pay 40% more . paypal can tap into this and help them , they dont have home equity so cant use this money if they own a home to finance their kids college or start their own business → not getting a mortgage closes access to other types of finances
Global
covid
Corporate level view
Paypal offers different services → 4 division in 2020: person to person (money transfer, called venmo), point of sale (pay with paypal online, can pay in physical store), remittances (money transfers), financial services,
Diversified company
posie puts rose first
Porter analysis
1) Have to analyze 4 different industries (the ones above)–> but case doesnt give info on each
2) POS was the OG
3) Ecommerce was new and customers were not equipped to accept credit cards or debit cards
4) They diversified into the four categories over time
5) Does it make sense to have all 5 services over time: yes it does, creates multiple touchpoints, can serve customers in multiple ways and address multiple ways and can tap into new demographics , broadens customer base and more revenue, same customer at multiple touch points
For porters were doing it all together
Intensity of rivalry
Other digital payment companies (china→ Alibaba, weechat) direct competitors include: stripe, square (the other digital wallets)
They were competing with Google and apple, facebook, amazon, telephone carriers, retailers such as walmart and costco (see exhibit 5)
Banks are substitutes so beware
Several categories of competitors
Many companies are Currently competing or wanting to
Profit margins: hurts our profit margins, forces price reduction, invest more in product differentiation and r&d, forced to sell market share → we have to invest in many costs
Create switching costs by offering more services so it locks the customer in
Have to invest more in marketing, band building so increased costs
The product isnt differentiated, its a commodity
Threat of new entrants
Tech giants coming in
You make money off of transactions so companies want to join
Even though there are barriers to entry (you need capital), there is access
Attracted to high growth of digital payments and financial services
HIGH
Paypal has to always invest and stay ahead and alert
threat of subs
Traditional banks→ people still use them all the time, very present
threat of subs, people arent switching from banks
Significant
Banks like to deal with big businesses→ reasoning→ favors customers with larger cash balances (no loans) , banks have much higher costs so they have to offset the costs→ created this underserved market that paypal could take advantage of (they have lower costs than banks so can serve small merchants)
Bargaining power of buyers
Who are the buyers; have other options→ product is a commodity, many companies can offer same services which increases buyers bargaining power
Products are undifferentiated
Different categories of buyers
Consumer side: there are different buyer power bc people who are richer might have more bargaining power, small consumers with bad credit might have fewer options
Merchant side : get business loans , also customers
Paypal serves both sides → platform between consumers and merchants
Bargaining power of suppliers
Who are the suppliers: Any tech providers, server providers, chips, small banks
Benign bargaining power of suppliers
Paypal works with some small banks to provide certain service
Is paypal profitable?
Check the exhibits → look at net income
It is because the net income is positive and is growing (2020 really helped their profit)
Profit margin: profit divided by sales → 19%
Tech giants and startups are attracted bc there is high growth and profits
