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PayPal (PYPL) Boosts Focus on Small Businesses With New Card

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In a bid to gain further traction among merchants, PayPal (PYPL - Free Report) is constantly making efforts to strengthen its technology-driven payment solutions portfolio.

This is evident from the latest launch of PayPal Business Cashback Mastercard — its business credit card, which is backed by Mastercard and issued by WebBank.

PayPal strives to cater to the daily financing needs of small businesses on the back of the underlined credit card, which offers several benefits.

Cardholders are entitled to get a 2% cashback on all purchases, and avail of advanced security features such as Mastercard ID Theft Protection and Zero Liability. There are no annual fees and foreign transaction fees.

The card offers a competitive annual percentage rate (APR) between 13.99% and 29.99%, and seamless access to transactions, balances, available credit and rewards through the integration with PayPal's merchant platform.

Thus, small businesses will be able to manage their day-to-day operating expenses with PayPal Business Cashback Mastercard.

Growing Focus on Small Businesses

We note that PayPal remains well-poised to gain solid momentum among small businesses on the back of the new card.

The latest move bodes well for the company’s deepening focus on strengthening offerings for small businesses.

Apart from the latest move, the expanding global reach of PayPal Business Debit Mastercard remains noteworthy. Notably, the card, which is ideal for small businesses, does not carry any monthly fees or foreign exchange fees. The card allows users to access the funds stored in their PayPal accounts at more than 52 million Mastercard acceptance locations throughout the world.

In addition, the company offers PayPal Working Capital and PayPal Business Loans, which are focused on catering to the needs of small businesses.

We believe all these endeavors will boost the small merchant base of PayPal, which, in turn, would drive its top-line growth in the days ahead.

Notably, the company generated first-quarter 2022 net revenues of $6.5 billion, which exhibited year-over-year growth of 8% on an FX-neutral basis and 7% on a reported basis.

Growing Digital Payment Initiatives

The latest move bodes well for the company’s growing efforts to bolster its card offerings. Also, it is in sync with the company’s strengthening digital payment endeavors.

In addition to the latest launch, PayPal recently unveiled a payment card, namely the PayPal Cashback credit card issued by Synchrony, which allows customers to gain more rewards while shopping both online and offline, and paying with PayPal.

More precisely, the card offers a 3% cash back when paying with PayPal at checkout — online, mobile, or in-store with PayPal QR Code. It gives an unlimited 2% cash back on all other purchases made through Mastercard wherever accepted.

PayPal’s partnership with United, under which PayPal QR Code was made available as a payment option for passengers on boarding flights of the latter, remains noteworthy.

We believe all the above-mentioned efforts will continue to expand PayPal’s footprint in the booming digital payment world.

Per a report from Statista, this particular market is expected to generate a transaction value of $8.7 trillion in 2022, which is expected to see a CAGR of 12.8% between 2022 and 2026, and hit $14.1 trillion by 2026.

However, the company is currently suffering from intensifying competition in this particular market, which poses a serious risk to its market position.

Weakening momentum in the international market and uncertainties related to the ongoing coronavirus pandemic remain other major concerns for the company

These factors are hurting investors’ sentiments toward the PYPL stock. Notably, PayPal has lost 61.9% on a year-to-date basis.

Zacks Rank & Stock to Consider

Currently, PayPal carries a Zacks Rank #4 (Sell).

Investors interested in the broader Zacks Computer & Technology sector can consider some better-ranked stocks like Paycom Software (PAYC - Free Report) , Aspen Technology (AZPN - Free Report) and Amdocs (DOX - Free Report) . While Paycom Software and Aspen technology sport a Zacks Rank #1 (Strong Buy) at present, Amdocs carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Paycom Software has lost 31% in the year-to-date period. The long-term earnings growth rate for PAYC is currently projected at 25%.

Aspen technology has returned 21.7% in the year-to-date period. The long-term earnings growth rate for AZPN is currently projected at 18.4%.

Amdocs has gained 5.6% in the year-to-date period. The long-term earnings growth rate for DOX is currently projected at 10%.

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