After posting monster growth in 2020 and 2021, in large part from the pandemic's boost for online shopping and digital transactions, PayPal Holdings (PYPL 0.87%) pumped the brakes in 2022, with total payment volume (TPV) and revenue increasing 8% and 9%, respectively, a sharp slowdown from the prior two years. And the stock has taken a beating, down 76% from its all-time high. 

Like most other businesses, PayPal is dealing with tough comparisons, macroeconomic concerns, and normalization of consumer behavior, which on their own wouldn't be enough to sound the alarm. But there is something else that shareholders should start to pay attention to. 

Here's why Apple (AAPL 0.40%) might be PayPal's biggest threat. 

The competition from Cupertino 

At first glance, it might seem like there's nothing getting in the way of fintech leader PayPal. It processed $1.36 trillion in TPV last year, and the payments platform has 435 million active accounts today. Even more impressive is that PayPal's checkout feature is available at 79% of the top 1,500 retailers in North America and Europe. 

But Apple Pay, which was launched in late 2014, is becoming a formidable opponent. It is the tech giant's mobile payment service that lets users add their debit or credit cards to their digital wallets on their devices to pay at millions of merchants, whether in-store or online. At the time of launch, CEO Tim Cook made it clear that he wanted a piece of the gargantuan payments sector. 

Apple Pay has made remarkable progress. It commands a 28% acceptance rate at the 1,500 largest merchants in North America and Europe, second only to PayPal. What's more, Apple claims that 85% of U.S. retailers accept Apple Pay. That near-ubiquity is outstanding for a service that hasn't been available for even a decade. 

Apple's advantage over PayPal is that the former now counts a whopping 2 billion active devices worldwide. And while Apple Pay is built into only four types of products -- the iPhone, Apple Watch, Mac, and iPad -- the potential for higher usage is certainly there.

Another valid argument providing more bullish support for Apple Pay is the fact that iPhone users are generally higher-income earners than their Android counterparts. This means they have more spending power, a boon for Apple Pay, which earns 0.15% from each transaction. 

Smartphones are already essentially consumers' gateway to anything they do. It's hard to argue that these devices one day can't become the de facto method of payment, particularly for in-person transactions, with Apple Pay leading the charge.

Ark Invest believes so, too. According to the investment firm's Big Ideas 2023 report, there will be 5.6 billion digital-wallet users by 2030, versus 3.2 billion today.

Moreover, the Cupertino, Calif., tech giant is showing some promising strength more recently compared to PayPal. According to Bryan Keane, an analyst from Deutsche Bank, Apple Pay's adoption was up 52% year over year globally in November. The data Keane looked at also showed that PayPal's usage actually declined 8% worldwide during the same period. This was when consumers were focused on shopping for the holiday season. It could be a harbinger for future trends. 

From anecdotal evidence, checking out with Apple Pay is more seamless than using PayPal for online transactions. With just two taps of the side button, the iPhone will run its facial recognition software, and the transaction will be complete. PayPal, on the other hand, requires a separate window to log into in order to complete the purchase. 

Apple doesn't break out the revenue it generates from Apple Pay. But according to Statista, Apple Pay is set to generate $4 billion in revenue in 2023, a huge increase from the less than $1 billion it produced in 2019. For comparison's sake, PayPal registered total sales of $27.5 billion in 2022. 

Apple Pay's foray into the fintech space came 16 years after PayPal was founded, but the tech giant is already making rapid progress. Its growth in popularity is something PayPal shareholders need to pay attention to.