PayPal will launch its first mobile wallet in Germany as part of its strategy to capture a greater share of in-store payments.
At checkout, consumers can access the wallet through PayPal’s app and tap-to-pay at merchants that accept Mastercard contactless payments. The app will also provide a unified view of both online and in-store transactions.
PayPal hopes to differentiate its digital wallet by offering cashback incentives when users make contactless payments at select German retailers. However, despite this feature, standing out in an already saturated market may be challenging.
“The wallet they are announcing is new to PayPal, but just the same as Apple Pay and Google Pay,” said Don Apgar, Director of Merchant Payments at Javelin Strategy & Research. “While this pay-in-the-store-with-a-wallet concept isn’t new, it’s a big shot in the arm for PayPal, who desperately needed this to compete. I’m not sure why they picked Germany to launch, but I’m sure they had their reasons. The big question is why it took PayPal so long to launch this?”
Pushing the Stablecoin
The mobile wallet launch follows the payments firm’s push for its PYUSD stablecoin. PayPal recently inked a deal with Coinbase to remove fees for purchases of PYUSD in an effort to drive adoption of the stablecoin on the exchange.
PayPal also announced that customers will be able to earn 3.7% interest when they hold the stablecoin in their PayPal or Venmo accounts. Since its launch two years ago, PYUSD has struggled to gain momentum in a market dominated by Tether and Circle, and increasingly crowded with new entrants.
Entrenched and Battle-Tested Competition
While it’s not yet clear whether crypto or stablecoin transactions will be included in PayPal’s new digital wallet, the company does plan to support its Pay Later functionality for in-store purchases. The buy now, pay later (BNPL) feature will allow German users to pay in 3- to 24-month installments.
A PayPal digital wallet that combines crypto, BNPL, and contactless payments would align with several dominant trends in the payment industry. However, while Apple and Google don’t issue their own stablecoins, their wallets are more established and thoroughly tested. As with PYUSD, a later entry into the market may make it difficult for PayPal’s wallet to gain traction.
