Editor's note: This article has been corrected. Stripe does not build PayPal into offerings for its clients.

The current bear market weighs on investor holdings, but it's also suppressing the initial public offering (IPO) market. That's because investors seem to be more cautious about buying stocks, and with high interest rates, there's less money to spread around in potential investments.

The previous bull market reached a height in 2021 and was capped off by a year of record initial public offerings (IPOs) -- more than 1,000, topping the previous record year set in 2020. But in 2022, only 181 IPOs were initiated, and there have only been 146 so far this year. Among the IPOs that did launch this year, there were very few that investors got excited about, and that has been reflected in the IPO market generally. These days, new stocks often debut at inflated prices with very little post-IPO gains and a quicker drop in enthusiasm.

Digital payment processing company Stripe has filed paperwork showing its intent to make a public offering, but no IPO date has been set yet. A potential IPO for the company has been talked about for years, and there is hype for a Stripe IPO. With competitor PayPal (PYPL 2.90%) already struggling, what could a Stripe IPO mean for PayPal stock?

What does Stripe do?

Stripe calls itself a "technology company that builds economic infrastructure for the internet." That's a succinct description but a little vague. It's probably simpler to say Stripe provides payment processing services for digital retailers.

That's also what PayPal does. But they aren't exactly the same. PayPal's services are geared toward a turnkey type of approach, with quick setup and a large range of solutions that attract millions of merchants with easy-to-implement payment and shopping options. It also has an omnichannel focus.

Stripe, on the other hand, focuses more on infrastructure with solutions geared more toward customization and company-specific needs. It's also focused exclusively on digital services at the moment.

PayPal is seeing high growth with its Braintree product (a direct competitor to Stripe's services) since it's a white-label checkout service for brands, where shoppers won't see the PayPal label in the checkout process.

While PayPal works with plenty of high-profile companies in addition to its small business clientele, Stripe works more exclusively with enterprise companies, creating the payment infrastructure without any Stripe branding. Clients include Amazon, Shopify, Airbnb, and Uber Technologies. Stripe's solutions power payments for 75% of the Forbes Cloud 100 companies.

Another fintech stock to compete with

Fintech has become mainstream, and while PayPal still has its first-mover's edge in the industry, there are many players at this point. Each brings something different to the table, and in some ways, the advent of fintech for everyone benefits PayPal more than anyone else.

In other ways, PayPal has been hurt by competitors' success. It's the largest fintech of its kind, processing $1.36 trillion in total payment volume (TPV) in 2022 vs. $817 billion for Stripe. But that size means it's been moving slower to offer more targeted and improved services, catering to the masses, and smaller, niche companies are moving in to harness opportunities for more precise and focused solutions. Stripe is one example, with its better customization.

It's not that Stripe's IPO would make any difference to PayPal's business, which is already feeling the impact of new fintech companies. For example, eBay, from which PayPal was spun off, switched its primary processing company to PayPal competitor Adyen.

However, new fintech stocks, especially ones demonstrating higher growth, could attract more investor interest and leave investors feeling even more bearish about PayPal's prospects. Stripe's TPV increased 26% year over year in 2022, whereas PayPal's increased 9%.

Stripe's management noted that 2022's growth was a slowdown from previous years, especially the e-commerce boom early in the pandemic. That may be why it's holding off on its IPO despite laying the groundwork for going public.

PayPal stock is a bargain right now

PayPal recently got a new CEO who is making significant inroads into changing the focus of operations and clarifying PayPal's growth strategy. Like perennial payment processing winner Visa, PayPal has a wide lead over its competition and should be able to maneuver to keep that up.

With PayPal's slowdown and management changes, investors haven't been too happy with it lately. PayPal stock trades down 21% this year, and it's trading at a price-to-earnings ratio of under 17, its cheapest valuation in more than 10 years.

Fintech investors should keep an eye out for Stripe's IPO, but a new stock in town doesn't spell the end for industry leader PayPal.