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PayPal's BNPL and Credit Growth: Can It be a Further Upside Driver?
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Key Takeaways
PayPal expects financial-services revenues to grow at least twice as fast as the company in 2026.
BNPL TPV grew 26%, while monthly active accounts increased more than 20% in Q2 2026.
Rising charge-offs and liquidity needs add risks as PayPal expands credit and financial services.
PayPal Holdings (PYPL - Free Report) is increasingly relying on financial services to diversify its growth beyond payments and branded checkout. Management expects financial-services revenues, including credit and BNPL, to grow at least twice as fast as the overall company in 2026. In the second quarter of 2026, financial services already accounted for close to 20% of PayPal’s transaction margin.
Buy Now, Pay Later (BNPL) is emerging as a key growth driver. BNPL total payment volume (TPV) grew 26%, while monthly active accounts (MAAs) increased more than 20% in the second quarter of 2026. PayPal plans to expand the product through broader merchant distribution, additional markets and a wider product portfolio, creating more opportunities to deepen customer engagement.
Credit and debit products are also strengthening PayPal’s financial-services ecosystem. In the second quarter of 2026, Venmo Debit Card MAAs grew more than 50%, while customers using both Venmo Debit and Pay with Venmo generated more than nine times the average revenue per account (ARPA) of peer-to-peer-only users. This highlights the opportunity to generate more revenues from PayPal’s existing customer base.
However, expanding financial services comes with risks. In the second quarter of 2026, consumer and merchant net charge-off rates have increased to 4.8% and 7.6%, respectively. Credit expansion also increases liquidity requirements and makes PayPal partly dependent on external funding sources to support lending growth.
Overall, financial services could become one of PayPal’s most important long-term growth engines. The key will be balancing BNPL, credit and debit adoption with strong credit quality, capital efficiency and attractive returns.
How Are PYPL’s Competitors Faring
Affirm Holdings (AFRM - Free Report) is a major PayPal BNPL rival. In fiscal 2026, Affirm generated $50.2 billion in GMV, up 37% year over year, and served about 28 million active consumers and 571,000 active merchants. Its rapid growth highlights strong competition in installment lending and online checkout financing across digital commerce.
Klarna (KLAR - Free Report) also competes directly with PayPal in BNPL and consumer credit. In the second quarter of 2026, Klarna reported $36.6 billion in GMV, up 18%, while revenues rose 27% to $1.04 billion. It had 120 million active consumers and more than 1.2 million merchants, giving it substantial global distribution scale and checkout reach.
PYPL’s Price Performance, Valuation & Estimates
Shares of PayPal have gained 37.6% in the past three months compared with the broader industry and the S&P 500 Index.
Image Source: Zacks Investment Research
From a valuation standpoint, PayPal’s shares are trading cheaply, as suggested by the Value Score of A. In terms of forward 12-month P/E, PYPL stock is trading at 10.03X, which is at a significant discount to the Zacks Financial Transaction Services industry’s 19.20X.
Image Source: Zacks Investment Research
PayPal’s estimate revisions reflect a positive trend. The Zacks Consensus Estimate for full-year 2026 EPS has been revised upward to $5.38 over the past week. The consensus estimate for the metric indicates a year-over-year increase of 1.32%.
View the Zacks #1 Rank List
Image: Bigstock
PayPal's BNPL and Credit Growth: Can It be a Further Upside Driver?
Key Takeaways
PayPal Holdings (PYPL - Free Report) is increasingly relying on financial services to diversify its growth beyond payments and branded checkout. Management expects financial-services revenues, including credit and BNPL, to grow at least twice as fast as the overall company in 2026. In the second quarter of 2026, financial services already accounted for close to 20% of PayPal’s transaction margin.
Buy Now, Pay Later (BNPL) is emerging as a key growth driver. BNPL total payment volume (TPV) grew 26%, while monthly active accounts (MAAs) increased more than 20% in the second quarter of 2026. PayPal plans to expand the product through broader merchant distribution, additional markets and a wider product portfolio, creating more opportunities to deepen customer engagement.
Credit and debit products are also strengthening PayPal’s financial-services ecosystem. In the second quarter of 2026, Venmo Debit Card MAAs grew more than 50%, while customers using both Venmo Debit and Pay with Venmo generated more than nine times the average revenue per account (ARPA) of peer-to-peer-only users. This highlights the opportunity to generate more revenues from PayPal’s existing customer base.
However, expanding financial services comes with risks. In the second quarter of 2026, consumer and merchant net charge-off rates have increased to 4.8% and 7.6%, respectively. Credit expansion also increases liquidity requirements and makes PayPal partly dependent on external funding sources to support lending growth.
Overall, financial services could become one of PayPal’s most important long-term growth engines. The key will be balancing BNPL, credit and debit adoption with strong credit quality, capital efficiency and attractive returns.
How Are PYPL’s Competitors Faring
Affirm Holdings (AFRM - Free Report) is a major PayPal BNPL rival. In fiscal 2026, Affirm generated $50.2 billion in GMV, up 37% year over year, and served about 28 million active consumers and 571,000 active merchants. Its rapid growth highlights strong competition in installment lending and online checkout financing across digital commerce.
Klarna (KLAR - Free Report) also competes directly with PayPal in BNPL and consumer credit. In the second quarter of 2026, Klarna reported $36.6 billion in GMV, up 18%, while revenues rose 27% to $1.04 billion. It had 120 million active consumers and more than 1.2 million merchants, giving it substantial global distribution scale and checkout reach.
PYPL’s Price Performance, Valuation & Estimates
Shares of PayPal have gained 37.6% in the past three months compared with the broader industry and the S&P 500 Index.
Image Source: Zacks Investment Research
From a valuation standpoint, PayPal’s shares are trading cheaply, as suggested by the Value Score of A. In terms of forward 12-month P/E, PYPL stock is trading at 10.03X, which is at a significant discount to the Zacks Financial Transaction Services industry’s 19.20X.
Image Source: Zacks Investment Research
PayPal’s estimate revisions reflect a positive trend. The Zacks Consensus Estimate for full-year 2026 EPS has been revised upward to $5.38 over the past week. The consensus estimate for the metric indicates a year-over-year increase of 1.32%.
Image Source: Zacks Investment Research
PayPal currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.