PayPal plans to use its massive repository of user spending data to create an advertising sales network. The payments platform, which includes Venmo, has more than 400 million users worldwide and processed around $6.5 billion in payments in Q1 2024.
According to the Wall Street Journal, insights into all of these transactions will be available for purchase not only by PayPal’s current advertising customers but also by outside advertising firms. These companies can then create ads specifically targeted at consumer segments like frequent travelers or luxury item buyers.
In a similar move, JPMorgan Chase recently announced it would sell advertisers access to its customers’ banking histories. While PayPal might be the latest financial firm to auction its users’ spending information for ad revenue, it’s likely not the last.
“Payment transactions and spend habits are a treasure trove of data for an advertising firm,” said Benjamin Danner, Senior Analyst, Credit and Commercial, at Javelin Strategy & Research. “Knowing where customers have shopped in the past is a great predictor of their purchase habits in the future. You can certainly expect more traditional financial institutions and fintechs to follow the lead of JPMorgan Chase and PayPal.”
Option to Opt Out
The announcement might raise eyebrows since PayPal was investigated for a series of privacy concerns over the past few years. The company drew a $15 million fine from the Consumer Financial Protection Bureau in 2015 for enrolling and billing thousands of customers in its credit services without their consent.
By default, PayPal users will share their spending habits with the new ad network, but they will be given the option to opt out. The company also plans to be cautious with ads and promotions targeted at Venmo users because it doesn’t want to deluge the app’s younger and more social-media-oriented user base.
This latest data-driven effort comes after the January launch of PayPal’s Advanced Offers platform. Advanced Offers uses artificial intelligence to sift through customer data and give users personalized promotions and cash-back rewards. It also allows advertisers to deliver personalized ads to PayPal customers, an approach that has reportedly already been tested by eBay.
