Core Insights - Zip US has launched a new payment feature called 'Pay in 2', allowing customers to split purchases into two instalments over a two-week period, aimed at providing a shorter repayment schedule for everyday purchases [1][2] - The 'Pay in 2' option complements Zip's existing 'Pay in 4' plan, which allows payments to be spread across six weeks for higher-value items [2] - A pilot program indicated strong demand for the 'Pay in 2' option, with 95% of survey participants expressing willingness to use it again for routine expenses like groceries and bills [3] Product Features - 'Pay in 2' is designed to help customers manage cash flow within a single billing cycle, offering flexibility for smaller, recurring purchases without the commitment of a longer installment plan [2][4] - To promote early adoption, Zip is providing a limited-time incentive where the first 100 customers each day who initiate a 'Pay in 2' purchase will receive a year without origination fees on future orders [4] Customer Feedback - Customers have reported that 'Pay in 2' feels manageable and fits naturally between paychecks, making everyday purchases less stressful [2][3] - Joe Heck, US CEO at Zip, emphasized the company's commitment to understanding customer preferences and providing alternatives to traditional high-interest credit products [3]

Core Viewpoint - The shift towards buy-now, pay-later (BNPL) options among younger consumers presents a significant opportunity for companies like Affirm, which is well-positioned to benefit from this trend [1][4]. Industry Overview - BNPL has gained immense popularity, transforming short-term credit into a convenient checkout option on e-commerce platforms and digital wallets [2]. - Approximately 90 million Americans utilized BNPL services last year, with an average monthly spend per user reaching $244 [3]. Company Positioning - Affirm, a leading BNPL operator, allows consumers to spread payments over time through short-term installment loans, primarily earning fees from merchants rather than charging interest [5][6]. - The average order value for Affirm's short-term products is $100, with funding available for purchases ranging from $35 to $1,000 [6]. Financial Performance - Affirm's gross merchandise volume (GMV) surged from $20.2 billion to $36.7 billion, marking a 38% increase last year [10]. - The company has reduced its operating loss from $1.2 billion in 2023 to $87 million last year, achieving its first profitable quarter on a GAAP basis with an operating income of $63.7 million [15]. Strategic Partnerships - Affirm has established partnerships with major e-commerce platforms like Amazon and Shopify, leading to a 70% increase in total partner volume over the last year [11]. Future Projections - The company projects a GMV of $47.5 billion for its 2026 fiscal year, with anticipated operating margins of 7.5% [16].

Core Insights - Klarna made its stock market debut in September 2025, but its shares have decreased by approximately 24% since the IPO, contrasting with a 7% increase in the S&P 500 index [1][2] Business Model - Klarna's primary service is the "Buy Now, Pay Later" (BNPL) model, particularly its "Pay in 4" option, which allows consumers to make four interest-free payments if the total amount is repaid within about six weeks [3] - The company also offers longer-term financing options, termed Fair Financing, which are closed-end loans with terms ranging from six to 24 months and are designed for higher-cost goods and services [4] Financial Performance - Klarna achieved a record quarterly revenue of $903 million in Q3 2025, reflecting a 28% year-over-year increase [5] - The gross merchandise value (GMV) in the U.S. surged by 43%, contributing to an overall GMV of $32.7 billion [6] - The total number of merchants using Klarna's services increased by 38% to around 850,000, alongside a 32% rise in active customers [6] Strategic Direction - Klarna is positioning itself as a "digital bank," indicating a shift in focus beyond just BNPL services to broader financial offerings [9] - The company plans to launch its own stablecoin, KlarnaUSD, which aims to reduce costs and potentially enhance profitability if managed effectively [10]

Core Insights - PayPal Holdings (PYPL) shares are currently undervalued with a Value Score of A, trading at a forward 12-month price-to-earnings (P/E) ratio of 10.24X, significantly lower than the industry average of 21.12X [1][6] - Compared to peers Visa and Mastercard, which have P/E ratios of 26.84X and 30.47X respectively, PayPal's discounted valuation raises questions about its attractiveness as an investment opportunity [2][19] - Despite the low valuation, PayPal faces challenges such as macroeconomic uncertainty, competition from fintech rivals, and the need for innovation in the payment landscape [3] Valuation and Performance - PYPL shares have decreased by 10.6% over the past three months, while the industry fell by only 1% and the S&P 500 increased by 4.7% [4] - Earnings estimates for 2025 and 2026 have been revised upward, with 2025 earnings expected to be $5.34 per share (14.8% growth) and 2026 earnings at $5.86 per share (9.7% increase) [8] Strategic Partnerships and Initiatives - PayPal has formed strategic partnerships, including one with Logicbroker to enhance agentic commerce services for merchants [10] - The collaboration with Perplexity aims to integrate PayPal's services into AI-driven retail, enhancing discoverability and checkout experiences [11] - PayPal is also expanding its offerings with features like "PayPal links" for easy money transfers and a "Pay in 4" buy now, pay later solution for Canadian customers [13] Transformation into a Broader Commerce Platform - PayPal is evolving from a payments company to a comprehensive commerce platform, with plans to establish PayPal Bank to offer small business lending and interest-bearing savings accounts [14] - The "PayPal World" initiative aims to unify various payment systems and digital wallets, providing merchants access to a larger customer base [15] - PayPal is increasing its involvement in cryptocurrency with the PYUSD stablecoin and a "Pay with Crypto" option, positioning itself for future digital commerce trends [16] Venmo's Growth Contribution - Venmo is targeting young, affluent consumers and has launched Venmo Stash, a rewards program to enhance user engagement [17] - Venmo is projected to generate $1.7 billion in revenue for 2025, reflecting over 20% growth and a significant acceleration compared to previous years [18] Investment Outlook - PayPal's current valuation suggests that investors may be overlooking its long-term growth potential, presenting a compelling entry point [19] - While short-term challenges exist, the improving earnings outlook, strategic partnerships, and growth initiatives provide a basis for optimism regarding PayPal's recovery [19]

Core Viewpoint - PayPal, once a disruptor in the financial industry, is now shifting its strategy to become a bank by applying for a banking license, indicating a compromise with the realities of the competitive landscape and regulatory environment [1][2][9]. Group 1: Business Model and Revenue - PayPal's revenue is heavily reliant on its payment business, which accounts for over 90% of its income, making it vulnerable to competition from other payment platforms [2][5]. - The company's market share has declined by 14.5 percentage points over the past three years, primarily due to competition from Block, Apple Pay, and Google Pay [2][8]. - PayPal's payment processing fees range from 1.7% to 2.0%, significantly higher than domestic competitors, which poses a risk as competitors engage in price wars [8][10]. Group 2: Challenges and Competition - PayPal's credit and wealth management services have not developed significantly due to strict regulatory environments and competition, limiting its ability to offer personal loans [6][11]. - The company faces challenges in maintaining user growth, with a projected decrease of 1 million active users from 2022 to 2024, and a 5% year-over-year decline in transaction frequency by Q2 2025 [8][9]. Group 3: Strategic Shift to Banking - The application for a banking license is seen as a critical move for PayPal to enhance its competitive edge and create a more integrated financial platform [9][11]. - If approved, the banking license would allow PayPal to offer interest-bearing savings accounts and lower its funding costs by utilizing customer deposits instead of relying on external banks [11][12]. - The trend among fintech companies to acquire banking licenses reflects a broader shift away from the BaaS (Banking as a Service) model, aiming to establish more direct control over their financial services [12][13].

Core Insights - Klarna is expanding its partnership with Blackhawk Network to enhance gift card purchasing options for consumers ahead of the holiday season [2][3] - The collaboration allows consumers to purchase digital gift cards from over 350 brands using Klarna's payment options, which include Pay in Full, Pay in 4, and Financing [3][4] Company Developments - Klarna's chief commercial officer emphasized the importance of flexibility and control for consumers in gift card purchases as the company continues to grow in the U.S. market [2] - The partnership aligns with the rising popularity of digital gift cards, which can now be added to digital wallets like Apple Wallet and Google Wallet [5] Industry Trends - The demand for digital gift cards is increasing, with 81% of consumers having purchased a gift card in the previous year, marking a 6% increase from the prior year [5] - Klarna is evolving into a neobank, supported by a global retail payments network, with a revenue mix that includes merchant fees, interest income, and value-added services [6]

Core Insights - Affirm is enhancing its merchant and financial scale to compete with rivals like Klarna and PayPal by signing distribution deals with Worldpay and expanding its relationship with New York Life [1][8] - The company aims to integrate its payment solutions into various platforms, making it easier for consumers to choose Affirm as a payment option [2][4] Partnership Developments - Affirm has expanded its partnership with Worldpay to integrate its services into Worldpay's embedded payments option, which supports over 1,000 software-as-a-service companies that processed more than $400 billion in payments volume [3][4] - New York Life has agreed to purchase up to $750 million of Affirm's installment loans, providing off-balance-sheet funding that can support up to $1.75 billion in consumer loan volume per year [6] Market Positioning - Affirm has added 23 million users in the past 12 months, indicating strong consumer interest in its payment options, which include multiple payment methods beyond installment financing [4][8] - The company is focusing on mainstream payment solutions, aiming to be present where consumers make payment decisions [2][5] Competitive Landscape - Affirm is in a competitive environment with other BNPL fintechs like PayPal and Klarna, which are also expanding their offerings and partnerships [8][10] - PayPal has recently entered a similar BNPL investment deal, indicating a trend among fintechs to bolster their BNPL portfolios [9][10] Future Outlook - Affirm is set to report earnings soon, which may provide further insights into its growth and market strategies [8]

Core Insights - PayPal is expected to report third-quarter 2025 results on October 28, with anticipated revenue growth of approximately 4% on a currency-neutral basis and non-GAAP earnings per share (EPS) between $1.18 and $1.22, aligning with the previous year's figures at the midpoint [1][8] - The Zacks Consensus Estimate for third-quarter revenues is $8.25 billion, reflecting a 5.18% increase from the same quarter last year [1][5] Revenue and Earnings Estimates - The consensus estimate for earnings is $1.19 per share, indicating a slight decline of 0.83% from the previous year's reported figure [2] - For the full year 2025, the revenue estimate stands at $33.14 billion, representing a year-over-year increase of 4.21%, while the full-year EPS consensus is $5.23, suggesting a 12.47% increase year-over-year [5] Transaction Volume and Margins - The Zacks Consensus Estimate for PayPal's Transaction revenues is $7.44 billion, indicating a 5.2% increase from the year-ago quarter [13] - PayPal anticipates transaction margin dollars to range between $3.76 billion and $3.82 billion, reflecting a 4% year-over-year increase at the midpoint [14] Total Payment Volume (TPV) and Active Accounts - The consensus mark for TPV is $448.938 billion, suggesting a 6.2% year-over-year growth, with active accounts expected to reach 439.1 million, up from 432 million a year ago [15] - However, the estimated number of payment transactions is projected at 6.558 billion, slightly below the previous year's figure of 6.631 billion [15] Strategic Initiatives and Partnerships - PayPal is transforming into a full commerce platform, focusing on enhancing the online payment experience and investing in AI for personalized commerce and fraud detection [7][8] - Recent strategic moves include a two-year agreement with Blue Owl Capital for $7 billion in "Pay in 4" loans and a partnership with Google to improve digital commerce experiences [11] Competitive Landscape and Valuation - PayPal shares have declined 18.2% year-to-date, contrasting with a 16.7% rise in the S&P 500, indicating competitive pressure from rivals like Visa and Mastercard [17][18] - Despite the struggles, PayPal's shares are considered undervalued, trading at a forward P/E of 12.25X compared to the industry average of 21.58X [19] Long-term Growth Potential - PayPal is evolving from a payment processor to a comprehensive commerce partner, aiming to strengthen consumer-merchant connections and enhance user experience [21] - The company is well-positioned to benefit from the growing demand for digital wallets and peer-to-peer payments, presenting a favorable entry point for investors [22]

Core Insights - PayPal Holdings Inc. has entered a two-year agreement with Blue Owl Capital to sell approximately $7 billion of Buy Now, Pay Later (BNPL) receivables originated in the US [1][3] - This transaction supports PayPal's balance sheet-light model for credit while allowing the company to maintain full responsibility for customer-facing activities related to its US Pay in 4 BNPL products [2][3] - The financial implications of this deal have already been incorporated into PayPal's Q3 and full-year 2025 guidance for both GAAP and adjusted EPS, as well as adjusted transaction margin dollars [2] Company Overview - PayPal Holdings Inc. operates as a technology platform facilitating digital payments for merchants and consumers globally [4] - Blue Owl Capital Inc. is an alternative asset manager in the US, providing solutions through permanent capital vehicles and long-dated private funds [4] Industry Context - Online consumer financing has been a strategic focus for PayPal since 2008, with the introduction of the Pay in 4 product in 2020, which allows consumers to split eligible purchases into four interest-free payments over six weeks [3] - The BNPL service has shown to drive higher sales for merchants, with consumers opting for BNPL spending over 80% more per transaction compared to standard branded checkout [3]

Core Insights - PayPal has partnered with Blue Owl Capital to enhance consumer financing, allowing Blue Owl-managed funds to purchase approximately $7 billion of PayPal's "Pay in 4" buy now, pay later (BNPL) loans, benefiting small business owners in the U.S. [1] - The "Pay in 4" program enables consumers to split purchases into four interest-free payments over six weeks, leading to increased spending—over 80% more compared to traditional payment methods [2][4] - This partnership reflects PayPal's disciplined capital allocation strategy, supporting the growth of its Pay Later portfolio and enabling further investment in strategic initiatives [3] Business Impact - Small businesses can offer more flexible payment options, enhancing customer satisfaction and loyalty, with simplified integration into existing PayPal systems [4] - PayPal processed over $33 billion in BNPL payment volume globally in 2024, marking a 21% increase from the previous year, indicating rapid growth in this sector [4] - Effective customer education on BNPL options is crucial for small business owners to manage cash flow and ensure consumers understand payment flexibility [5] Competitive Landscape - The growing array of BNPL options from various providers necessitates that small businesses evaluate these offerings based on costs, features, and customer experience [6] - PayPal's scale and consumer relationships allow for informed credit decisions through the "Pay in 4" program, positioning it favorably in the expanding BNPL market [6] - Small business owners must strategically incorporate BNPL solutions into their sales strategies to enhance customer engagement and sales volume while preparing for evolving customer needs [6]