Since its founding in 1998, PayPal (PYPL -1.96%) has helped pioneer the world of electronic payments, making it easier for consumers to send and spend money and for merchants to accept it. Over the years, the business added a ton of new product offerings for its user base, which stands at 429 million active accounts as of June 30. PayPal now sports a market cap of $97 billion. 

But Solana (SOL -2.46%), an innovative cryptocurrency with some key features, could make a dent in the top fintech stock's business over time. Let's take a closer look. 

Disrupting the payments industry 

In the trailing-12-month period as of the second quarter of 2022, PayPal processed a whopping 20.9 billion transactions for a total payment volume (TPV) of $1.3 trillion. And the company generated revenue during that span of $26.4 billion. This is one of the most important enterprises in the payments industry. 

PayPal primarily makes money by charging a fee on every transaction over its network. In the latest quarter, the average transaction take rate was 1.85%, down slightly from the prior-year period. That might seem like a trivial amount, but when PayPal is processing TPV in the trillions of dollars, it can add up. 

Also, think about the fee from a small merchant's perspective. An apparel retailer might earn a tiny profit margin of 5% on their sales, so if the transaction fee that a company like PayPal charges can be lowered, or better, eliminated, then that can significantly expand the bottom line. 

And this can translate to a host of other benefits for the retailer. The merchant can invest in growth opportunities, pay down debt, or pay themselves a dividend. And this is all possible by making payments cheaper. 

Enter Solana. Like Ethereum after The Merge was completed, Solana uses a proof-of-stake consensus mechanism. But what makes Solana special is its incredible speed. The blockchain can theoretically handle 50,000 transactions per second (TPS) at virtually no cost to users, which is a whole world better than Ethereum's 12 to 15 TPS. Solana is in the same neighborhood as Visa, which can handle 65,000 TPS. 

Earlier this year, Solana introduced something called Solana Pay. The premise is that a consumer and a merchant can transact directly with each other using SOL, Solana's native token, with instant settlement and fees that are fractions of a penny. A QR code is used at checkout, speeding up the sales process. And the merchant can drive a deeper connection with the customer by layering on loyalty programs and even non-fungible tokens. 

Less than two months after launch, Solana Pay had 600 businesses signed up. Obviously, this is not even close to PayPal's dominance in the space. But if the user experience can be improved for both consumers and merchants, and value can be added, then Solana Pay will certainly find a place in the lucrative payments industry. 

Too early to tell 

There's no doubt that Solana has some serious promise to achieve a wider level of adoption, particularly in payments, which is PayPal's home turf. Payments is an area that I see cryptocurrencies making inroads in, mainly because of their peer-to-peer setup and native tokens, so it's good to see Solana attacking a niche that it could have wild success in one day. 

But Solana taking over PayPal isn't happening anytime soon. Cryptocurrencies and blockchain technology are still so early in their development, and there are a lot of issues around consumer protection and network security that need to be figured out. Solana itself has dealt with network outages in the recent past. For a payment platform to be successful, reliability is a key feature that is nonnegotiable. 

As things stand today, Solana is currently the ninth most valuable cryptocurrency, and it has produced a monster return of 3,150% since its launch in April 2020. Investors who are optimistic about Solana's long-term prospects and bullish on Solana Pay might want to consider adding a small amount of the digital asset to their portfolios.