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Google's Relation with PayPal Deepens, Competition Intensifies

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Alphabet’s (GOOGL - Free Report) Google division is enhancing its partnership with PayPal (PYPL - Free Report) to strengthen presence in the digital payment market.

The company will now allow the PayPal account holders to make payments without signing in to their PayPal accounts or leaving the Google services if they add their details to Google Play account. This will make the payment process lot easier and quicker. Notably, this is in sync with Google’s strong focus to deliver hassle-free online payment experience.

Following the latest move, Google Play will now include Gmail, YouTube, Google Store and any services using Google Pay. Consequently, once the PayPal account is linked, customers can pay their bills or make peer-to-peer transfers across the entire Google ecosystem.

This deep relationship seems to be beneficial for both the companies.

By offering seamless payment option, PayPal’s account adoption will improve which will aid growth of its transactional revenues. Further, this will strengthen the partner base of the company.

This move is also expected to boost the user base of Google services and will definitely curb the rate of leaving Google sites while making payments. Additionally, it will augment Google’s payment services which will help the company to gain competitive edge in the market.

Notably, shares of Alphabet have returned 3% on a year-to-date basis compared with the industry’s decline of 4.1%.

Digital Payment Market Holds Promise

The online payment market is rapidly growing in today’s world with the increasing penetration of internet and smartphone use. Moreover, emergence of digital wallet and several payment apps has led to significant growth in this market.

Further, the market holds the potential of generating growth opportunities in the long run. Per the research by Capgemini and BNP Paribus, the digital payment volume is expected to reach 726 billion by 2020.

According to the data from Research and Markets, the mobile money market is anticipated to reach $405 billion by growing at a CAGR of 38.9% from 2017 to 2025.

In order to reap benefits from this expanding market, the tech giants are coming up with innovative applications. Alphabet, Apple (AAPL - Free Report) , Samsung, Microsoft (MSFT - Free Report) and Amazon (AMZN - Free Report) are few major players in the market for online payment apps.

Growing Competition

Google’s continuous efforts at enriching its customer’s payment experience remain a positive. Google Pay is the redesign of Android Pay and includes Google Wallet as well. The latest move of the company is a kind of extension of the ongoing partnership between both the companies.

Notably, PayPal has been a payment partner of Google since 2014. The latest features on Google play will give a tough competition to Microsoft’s recent announcement regarding its payment app.

Microsoft is planning to add a similar feature evident from its announcement of the integration of its digital wallet, Microsoft Pay into Outlook. This will allow the users to make payment directly from the invoice received on their Outlook accounts. This will allow users to make payments without leaving Outlook account.

Apple Pay is also performing well in the market. It was recently launched in Brazil, a month after Google Pay’s foray in the country. Currently, Apple in collaboration with Goldman Sachs, is planning to introduce a joint credit card to promote its payment app.

Samsung Pay is also gaining traction by expanding globally. Samsung is set to launch its payment app in South Africa this year. It already exists in Brazil, India, UAE, France and many more.

Reportedly, Amazon is also trying to establish its position in the payment market. The company is planning to add P2P payment feature to its voice assistant, Alexa.

We believe Google’s strong payment partner base which includes Braintree, Sripe, Cybersource, Vantiv, Visa, Mastercard along with PayPal will continue to augment its payment services.

All these endeavors are surely to provide Google a competitive edge over its tech peers.

Currently, Alphabet carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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