Text size
Courtesy Square
As Bitcoin climbs back to a record price near $20,000 a coin, fintech giants
PayPal Holdings
and
Square
are adding legitimacy to the once-shadowy world of crypto payments.
Both now offer users the ability to buy and sell cryptocurrency and potentially even transact with them at stores.
Interest in Bitcoin and other digital currencies has surged this year, driven by high-profile investors and a pandemic that has accelerated consumer comfort with payment options that don’t involve cash.
About 13% of people surveyed by Susquehanna Financial Group said they used Square’s (ticker: SQ) Cash app to buy Bitcoin, while 27% of PayPal (PYPL) users said they were either somewhat or very likely to buy cryptocurrency through the app.
Susquehanna analyst James Friedman, who rates both stocks a Buy, wrote in a note Tuesday that the survey findings should “prove instructive” to investors in Square and PayPal as well as to those considering taking a dive into cryptocurrencies.
Shares of PayPal have doubled this year, while Square is up 236%, compared with a 14% gain in the
S&P 500.
Bitcoin is up 162% this year.
In announcing its crypto plan in October, PayPal said it was making cryptocurrency more mainstream by making it available for use at 26 million merchants around the world.
“The shift to digital forms of currencies is inevitable, bringing with it clear advantages in terms of financial inclusion and access, efficiency, speed and resilience of the payments system, and the ability for governments to disburse funds to citizens quickly,” said PayPal CEO Dan Schulman.
Susquehanna’s Friedman said 39% of PayPal customers surveyed said they think more highly of the digital-payments app now that it offers crypto, and 53% said if they owned crypto, they would likely use it to pay at checkout.
Deutsche Bank analyst Bryan Keane said PayPal is trying to move to the front of the line as an e-commerce enabler, with an estimated 28% market share, and a key part of that strategy was opening its platform to crypto.
Citing another survey, Keane said 54% of PayPal users indicated in interest in PayPal’s crypto offerings.
“Even more powerful is the frequency of visits to the PYPL commerce portal from crypto users which will lead to higher engagement and balances resulting in more monetizable transactions,” Kean wrote, reiterating his Buy rating on PayPal stock.
He estimates crypto and the associated visits to PayPay’s app by those interested in it could boost quarterly revenue by the end of 2021 and lower PayPal’s funding costs, which will boost its margin.
Write to Liz Moyer at liz.moyer@barrons.com
